The IRS Deductions Blog

Posts Tagged ‘deductible ira contribution limits 2009’

Question: Had to recharacterize Roth contributions to Traditional IRA… now back to Roth in 2010?

In 2009 my husband and I each contributed $5000 to our Roth IRAs. We are a good 30 years from retirement. When we got our tax returns in order a couple of months ago we realized we had exceeded the limit for Roth and we had to recharacterize these contributions into Traditional IRAs. Now that 2010 is here and there is no income limit for rollovers, would we have to pay taxes on the rollover even though the contributions were already taxed in 2009?

A related question: If we were to contribute another $5k each for 2010 to the Traditional IRAs could we rollover this to the IRAs by the end of FY2010? In other words, is it possible to add the 2010 funds and then rollover? We are above the deductible income limit – so what taxes would then have to be paid in this scenario?

Answer: You are misusing the term “rollover.” If you are above the deductible income limit for traditional IRAs, it makes no sense to contribute to them – especially since you are 30 years away from retirement. Make your 2010 contributions directly into the Roth IRA(s) instead.

If you want to convert the traditional IRAs to Roths, 2010 is the year to do so because you can spread the tax bite out over two years.

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Not too early to think about 2011 taxes

The Bush-era tax cuts have been extended, the alternative minimum tax is patched and capital gains rates are set.

Question: Is there a max amount you can contribute to 2 seperate 401k accounts if you are married filing joinly?

My wife’s company just added a 401k and I am considering contributing to it but was wondering if there are limits to max 401k contributions if we file married/jointly? I currently max out my 401k account and I know with our combined income status IRA contributions are no longer tax deductible so I am worried adding to her 401k will bring the same limitation.

Answer: Both you and your wife can each contribute up to $15,500 to your respective employer 401(k) plans, assuming that these are the only employer retirement plans you participate in during the year. She can contribute up to $15,500 to her 401(k) and you can still contribute up to $15,500 to your 401(k) plan. If either of you will be age 50 or over by the end of the year, you may also be eligible to make a $5,000 catch-up contribution to either or both plans. Check with your employer plan to be sure they allow catch-up contributions if you would like to contribute the additional amount and are old enough to do so.

There is often an employer matching contribution available for employees who contribute to the employer 401(k) plan. If your wife’s employer offers a matching contribution, she should generally try to contribute at least the minimum amount that would qualify her for the employer match. Otherwise, she may be leaving some valuable retirement benefits behind.

You may want to consider reducing your own contribution to allow your wife to reduce her take home pay to enable her to fund at least the amount needed to obtain any available employer matching contribution. You’ll want to verify the terms of your plans so that you maximize the benefit that you can obtain as a couple for retirement.

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How unemployment affects your income taxes

If you lost your job last year, you might be in for some surprises when you file your tax return. If you got laid off near the end of the year with a big severance package or if you cashed in a retirement account, you could end up owing more than expected…. Tax – Retirement – Income tax – Unemployment – Layoff