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Dumb question on spouse's Roth IRA contribution
Old 01-23-2008, 01:28 PM   #1
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Dumb question on spouse's Roth IRA contribution

Is a payment received via a 1099-MISC considered earned income for a Roth IRA contribution? I know that I'm asking a very basic income question, but I've tripped up before by trying to apply logic to IRS documents.

Spouse has gotten herself involved with a 501(c)3 organization that's going to pay her as much as $750 during 2008. They collected a W-9 from her so I know from my own treasurer's stint at a non-profit that they'll issue a 1099-MISC. Since the income's being reported to the IRS I might as well stick it in a Roth IRA.

I'm basing this conclusion on page 60 of Pub 590 ( which says: "Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts received for providing personal services. It also includes commissions, self-employment income, and taxable alimony and separate maintenance payments." The $750 most closely matches the "professional fee" category for her efforts.

She puts the vast majority of her Reserve pay in her TSP so her W-2 income won't be much more than the 1099-MISC. She'll be well under the Roth contribution limits and our income won't be high enough to trigger any other limits.

Am I missing any other requirements or references?

We already tried to have the non-profit treat the money as an expense reimbursement or to have them pay her less than the 1099 limit of $600. The answer was "Sorry, this is how we do it." Not a very encouraging start.

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Old 01-23-2008, 01:38 PM   #2
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I'm not a tax pro, but as far as I know, you can fund a Roth IRA as long as you have earned income that equals the amount of the contribution.

The only caveat is that a 1099 Misc means you have to figure it as a gross amount, and pay taxes on it. Roths are after-tax contributions, so if the $750 is before tax, and ALL you do is exactly the $750, it may not look right. Not that they track things all that close.

Run it through Turbo tax and see what the program says, maybe........
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