401k and IRA contribution in same year
re: 401k and IRA contribution in same year
Client earned $7,000 on 2008 W-2 and had a $6,000 salary deferral contribution to Roth 401k. Now he also wants to contribute $6,000 for year 2008 to Roth IRA before filing form 1040 in April, 2009. (he’s over age 50 and has $39k AGI).
Is there is rule that the sum of 401k & IRA contributions by employee can’t exceed earned income?
Permalink Submitted by Alan Spross on Thu, 2009-02-05 21:12
No rule, and this does seem somewhat counter intuitive.
Box 1 of W-2 includes the Roth 401k contribution whereas it would not contain a pre tax 401k contribution. But since the Roth 401k contribution is taxable, client can still make a regular Roth IRA contribution.
The new 2008 Pub 590 still indicates that taxable compensation from a W-2 equals Box 1 less Box 11. Since the Roth 401k contribution appears in Box 1 but NOT in Box 11, dollars can be taken from another source to fund a Roth IRA contribution of 6,000 (age 50+).