Rich Carreiro wrote:
- quote -

By George you're right, Rich. Yesterday (or was it day
before?) was rather busy. That's my excuse and I'm sticking
to it! In fact I should have remembered last year when I
purposely did not let my corporation contribute to my SEP
IRA so I could (for the last time) contribute to a regular
IRA the max of 5000.

- quote -

And I spect that's really what happened in his case.

ChEAr$,
Harlan Lunsford, EA n LA

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Harlan Lunsford <hnslunsf...[at]bellsouth.net> wrote:
- quote -

The "retirement plan" box is only supposed to be check if
the employee is an "active" participant in the plan. Merely
being a participant is not enough. An active participant is
someone that is either

- covered by a defined benefit plan at any time during the
year (this doesn't apply to 401(k) plans); or

- covered by a defined contribution plan (e.g. a 401(k)
plan) and had either employer or employee contributions
added to his or her account during the year

From the OP's original posting, neither he nor his employer
made any contributions to the plan in 2006. If that is
actually the case and the OP was not covered by a defined
benefit plan, then the "retirement plan" box should not have
been checked. If that box is not checked, then the income
limitations on making deductible contributions are much
higher (if the OP's spouse was an active participant in a
plan) or are lifted altogether (if the OP is not married, is
not filing a joint return, or if the OP's spouse is not an
active participant in a plan).

I would recommend that the OP take a loook to make sure that
there were no additions to his account in 2006. If there
weren't, he should contact his former employer's HR
department and find out why the box was checked. If it was
checked improperly, the employer can issue a corrected W-2
form. If it was checked improperly and the employer refuses
to issue a corrected W-2 for, the OP could still take the
deduction for an IRA contribution, but the OP needs to be
ready to answer an inquiry from the IRS (which probably
won't come for another two years).

A lot of employers don't understand how to properly use this
box. It generally has no effect on the employer so they
take the easy way out and just check it for everyone.
Taking this easy way out could have a significant effect on
an employee that wants to make a deductable IRA
contribution.

--Chris

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Harlan Lunsford <hnslunsford[at]bellsouth.net> writes:

- quote -

That doesn't necessarily follow. Even if you are "in" a
401(k), you're only considered to be participating if you
put in money into your account, if your employer puts in
money into your account, or if any forfeitures are allocated
to you. If none of that happens, you didn't "participate",
even if you were enrolled.

This is in contrast to a defined-benefit plan where IIRC,
just being in the plan is considered "participating" under
the tax laws.

So from what the original poster said, the company may well
have erroneously checked the "Retirement" box in Box 13.
It's not like it never happens.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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Neal wrote:

- quote -

You're comparing apples with oranges and here is why i say
that.

In your mind, you think you did not participate in a
retirement plan because company didn't put anything into it.
However you were indeed still in the plan, hence that box
13 was checked, regardless of company contributions or your
own.

So then, only way to fund an IRA is for you to do it on your
own. And if your income is low enough, you do qualify for
full deductibility. If not, you may still qualify for
opening and funding a ROTH IRA. Check into it.

ChEAr$,
Harlan Lunsford, EA n LA

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nospam4me[at]please.com (Neal) posted:

- quote -

Sure, Neal. The fact is that the ability to make a
tax-deductible contribution to an IRA is tied to your having
received income from wages or self-employment.

Dividends, interest, retirement or annuity income don't
count. Social Security income doesn't qualify you. Only
wages or self-employment income!

Now for deductibility, there is also a limit on the amount
of Adjusted Gross Income (AGI) which you have -- and that
varies, depending on whether your employer offers a
retirement plan. Basically, if your 2006 "Modified AGI" was
less than $50,000, your IRA is deductible. If it was
between $50K and $60K, part of it was deductible. Once you
reached $60K, none of it could be deducted. (For MFJ, the
range is $75K - $85K.)

So those are the quick basics. See your 1040 Instructions
or Pub 590 for full information.

Bill

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I worked for several years at a job where I participated in
a 401(K). In order to qualify, you had to be employed for
the entire calendar year. I left that job in March of last
year. I received a distribution for my 2005 employment in
the first half of 2006. Since I didn't work all of 2006, I
won't receive any contributions for 2006. All of this is
straightforward and not a surprise to me.

I received my W-2 for 2006 and box 13 (retirement plan) is
checked. Since I won't be receiving any contributions for
2006, will I still be able to make a tax-deductibe IRA
contribution for 2006? I assumed that I would, but now am
unsure.

Could someone please clarify this for me?

Thanks.
Neal

<< ================================================== ===== > << 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. > << ================================================== ===== >