Qualify for deductible IRA?

[youbet]

I'm fully retired - no work, no SS, not collecting pension yet. DW collects a modest pension and works P/T (bless her heart! ). DW's P/T work does not have pension coverage. Our income will be above the limit to deduct IRA contributions if we are covered by a pension. A Roth IRA is also not an option this year.

Does either my vested, but yet to be collected pension or DW's pension disqualify us from deducting our IRA contribution even though neither of us works at a job with a pension benefit?

[OAG]

Not sure I fully understand your questions. However, Publication 590, available at the IRS Site (www.irs.gov) should have the answer. The current version is the 2007 publication but it should now have changed too much and the 2008 version should be coming out soon. Reasonably short publication.

[Martha]

Quote:

Originally Posted by youbet I'm fully retired - no work, no SS, not collecting pension yet. DW collects a modest pension and works P/T (bless her heart! ). DW's P/T work does not have pension coverage. Our income will be above the limit to deduct IRA contributions if we are covered by a pension. A Roth IRA is also not an option this year. Does either my vested, but yet to be collected pension or DW's pension disqualify us from deducting our IRA contribution even though neither of us works at a job with a pension benefit?

The IRC does not allow you to deduct contributions to an IRA if you are covered or available to be covered by an employer plan. However, the fact that she was covered under a prior employers plan does not count. Publication 590 (2007), Individual Retirement Arrangements (IRAs)

[kaneohe]

youbet------

I thought the answer was as Martha describes it but your question put some doubt in my mind. Here's the wording from Martha's citation(she's right as usual )

Covered by an employer retirement plan. If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. This is discussed later under Limit if Covered by Employer Plan. .........

The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. The “Retirement Plan” box should be checked if you were covered.

If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer.

[youbet]

Quote:

Originally Posted by kaneohe youbet------ I thought the answer was as Martha describes it but your question put some doubt in my mind. Here's the wording from Martha's citation(she's right as usual ) Covered by an employer retirement plan. If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. This is discussed later under Limit if Covered by Employer Plan. ......... The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. The “Retirement Plan” box should be checked if you were covered. If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer.

Thanks for the comments and references..... Sorry I haven't expressed myself more clearly.....

My question is really "what constitutes being covered by an employer's retirement plan?" Neither of us currently work in a job where we are covered by an employer's plan, but DW is actually collecting a pension and I have a pension vested that I'm not collecting on yet. Would the 1099 DW receives from the pension plan of her former employer constitute evidence to the IRS she's covered by a employer's pension plan? Or does "covered by an employer's retirement plan" mean currently employed and working for an employer that provides a pension plan? That is, collecting a pension DOES NOT constitute being covered by a pension plan for the purposes of IRA deductibility.

[youbet]

Quote:

Originally Posted by Martha the fact that she was covered under a prior employers plan does not count.

That's what I believe and hoping to be the case. I'm just worred about that 1099 from her pension provider being, in the eyes of the IRS, an indication she's covered by a pension. We've been contributing to non-deductible contributiory IRA's for a number of years due to income limititations for deductibility and Roths. I've decided it's time to stop that. I'd think my retired status and DW's PT work (not covered by a employers pension) would qualify us to deduct.....

[kaneohe]

youbet.......actually you have been pretty clear. The fuzziness is in the IRS language about being covered by a pension plan and your doubts made me doubt my previous beliefs.

a part of the IRS citation I noted previously:
The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. The “Retirement Plan” box should be checked if you were covered.

I don't know if they were being very precise in their wording here but they did
specifically refer to a W2 (not 1099) and a box about "retirement plan". I know a W2 has such a box but am too lazy to go look at a 1099 to see whether it has one. If it doesn't, perhaps that will make you more comfortable so I will leave it as an exercise for the OP.

[Martha]

IRS publication 590 has this statement buried within the section on deductibility of your IRA and whether you are covered by an employer plan:

Benefits from previous employer's plan. If you receive retirement benefits from a previous employer's plan, you are not covered by that plan.

[OAG]

Quote:

Originally Posted by youbet That's what I believe and hoping to be the case. I'm just worred about that 1099 from her pension provider being, in the eyes of the IRS, an indication she's covered by a pension. We've been contributing to non-deductible contributiory IRA's for a number of years due to income limititations for deductibility and Roths. I've decided it's time to stop that. I'd think my retired status and DW's PT work (not covered by a employers pension) would qualify us to deduct.....

Should not impact as I (back when I could) put money in a ROTH and on my 1040 there was 1099 data from a "retirement plan". Did it for about 4 years and never heard a whimper from the IRS.

[youbet]

Quote:

Originally Posted by Martha IRS publication 590 has this statement buried within the section on deductibility of your IRA and whether you are covered by an employer plan: Benefits from previous employer's plan. If you receive retirement benefits from a previous employer's plan, you are not covered by that plan.

Thanks Martha. That seems to be pretty clear.

kaneohe - the 1099 form has no check-off box regarding pension coverage.

OAG - thanks for the input.

Sounds like I'll be deducting our IRA contributions. That's great since it makes much of DW's PT job income tax deferred until mandatory distribution time in a decade or so!

Thanks all!