Can you double dip your income?
I work on an occasional basis and earn anywhere from a few thousand dollars up to about $24,000 per year. Because I don’t need the money now, I defer all of it into a Roth 401(k) – (I’m over 50). Because the earnings are taxable, the income shows up in Box 1 of my W-2. Can I also contribute to a Roth IRA based on that same earned income that I contributed to my employer’s plan? It seems there would be a law against double dipping, but my tax software seems to be showing me that I can. Thanks!
Permalink Submitted by Alan - IRA critic on Tue, 2018-07-17 20:29
Yes, you can make the Roth IRA contribution. Box 1 W-2 (less Box 11) is a safe harbor for IRA contributions, so your tax program is correct.
Permalink Submitted by [email protected] on Wed, 2018-07-18 13:55
How are Social Security and Medicare taxes withheld if the EE elected to defer $24,000?
Permalink Submitted by Alan - IRA critic on Wed, 2018-07-18 15:13
Elective deferrals must be reduced to allow for SS/Medicare taxes to be paid, and possibly certain other taxes or healthcare premiums. Therefore, the 100% limit is actually 100% after these other deductions are paid. However, the Roth contribution can still be made in full since savings can supply the Roth IRA funds as long as the Box 1 less Box 11 balance show the taxable compensation, and designated Roth contributions allow that to occur.