- quote -

And these are sometimes wrong too.
I worked parttime for organization which excluded me
from pension participation, yet the box was checked.
The CA revunues would periodically catch this discrepency
and I had to get an letter from the organization.

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dingodog_1979[at]yahoo.com wrote:

- quote -

Even though you did not "participate" in it, which I take it
means you didn't contribute to it, did employer contribute
to it on your behalf? If so, you're considered covered for
that year. However depending on your income you may be able
to make an IRA contribution nonetheless.

Holiday ChEAr$,
Harlan Lunsford, EA n LA

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

dingodog_1979[at]yahoo.com wrote:

- quote -

An individual is an active participant in a defined
contribution plan if either employer contributions, employee
contributions, or forfeitures are allocated to the
individual's account with respect to a plan year that ends
with or within the individual's tax year. IRS Notice 87-16,
Section I.A.

Note that the IRA deduction limitation kicks in if you were
an active particpant in any retirement plan set up by your
employer. Before taking the deduction, make sure that your
employer didn't make any contributions to your 401(k) and
that you aren't covered by something in addition to the
401(k) plan. Another thing to watch out for: Some employers
automatically kick in 3% of every eligible employee's
salary, even if the employee didn't make a
contribution--this 3% funding causes the 401(k) plan to meet
a safe harbor requirement so that highly compensated
employees in the plan don't have to worry about some
limitations that would otherwise be imposed by the pension
laws.

If you look at the W-2 form from your employer, if the
"Retirement Plan" box is checked, the employer is treating
you as an active participant in a retirement plan.
Employers have been known to be wrong in this regard,
checking the box for every employee without really looking
at who was participating. If there were no contributions to
your 401(k) account, you were not covered by any other
retirement plans, and the "retirement plan" box is still
checked, you can go ahead and make the IRA contribution, but
be prepared with an explanation in case the IRS sends you a
letter.

--Chris

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dingodog_1979[at]yahoo.com wrote:

- quote -

Check your W-2 form and see if the "pension plan" box is
checked. If it is, you are covered by a qualified employer
pension plan and your IRA may not be deductible.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

My employer has a 401(k) and I was stupid enough not to
participate in it (although I am eligible to participate).
Can I still make a tax-deductible contribution to IRA this
year? I read the rules but I am a little confused by who is
considered an active participant - somebody who actually
made contributions to 401(k) or somebody who is just
eligible to participate (although not participated for
whatever reason)?

Thanks!

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >