Company software somtimes errs in checking off the form. As
a part-time employee I didnt qualify for thr 401K plan, but
the W2 was marked wrong. So I had to get an annual letter
from the employee (why didnt they fix the software?). P.S.
The state caught this, not the feds.

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JustNick wrote:

- quote -

If you withdraw the money in the year of contribution (you
have until April 15 to do so) it will be as if the
contribution was never made. No tax, no penalty. Since you
can't deduct the contribution, you have already paid the
tax.

If the account has some earnings, those will be income for
2004 and subject to a 10% penalty tax.

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So if now I withdraw this money from IRA account will I have tax and
penalty both?

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JustNick wrote:

- quote -

1. Whether or not you can make a contribution to an IRA
depends upon your age and whether you have taxable earned
income.

2. If you are covered (active participant for at least one
day) by a retirement plan at work, you may not be able to
deduct your contribution if your income exceeds certain
levels.

Therefore, the issue you face is not whether you must
withdraw the contribution, but whether you want to withdraw
it or possibly change it to a Roth IRA contribution.

You need to speak with your manager or employer HR
department and find out why they checked that box. Maybe
they have a defined benefit plan that covers you that you
are unaware of.

--
Alan
http://taxtopics.net

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- quote -

You can leave it in as a nondeductible IRA or perhaps move
it to a ROTH.

Helen, EA in PA
Director, NAEA; Immediate Past President, PSEA; Tax Expert, AOL
Enrolled Agents - THE Tax Professionals

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"JustNick" <sanjayrpatel[at]hotmail.com> wrote:

- quote -

As long as you have not yet attained age 70½, your
contribution is legal. The only question for you is whether
it's deductible. If the check box is correct, you cannot
deduct the IRA. In that case, I would look into changing it
into a Roth IRA contribution, assuming you meet the income
limits.

If the check box is incorrect, get the employer to issue a
corrected W-2.

Barry Picker, CPA/PFS, CFP

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If someone has earn income of 100481 and status as MFJ who
deposited IRA $3000 in March 2004 and now he get W-2 with
Retirement Plan box checked in box 13 but has not made any
contribution in 401-K account.

What should he do?

Is IRA deposit still allowed or he need to withdraw money
without any penalty?

Please help.

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