IRA contribution 2013

[goodcat]

T/Ps filing joint return, husband has 124,000. w-2 salary. Spouse has no w-2 salary nor any other earned income.
Both are over 55 yrs old. Both have traditional IRA's. I know he can contribute 6500. to his IRA and deduct it ,but can the spouse with no income contribute to an IRA and deduct it on their 2013 return or are they limited to only 6500. for the husband?

[ATSMAN]

You can deduct your full contribution to a spousal IRA in 2014 if you as a couple have an adjusted gross income (AGI) of $181,000 or less and not covered by a retirement plan at work.

[Roland Slugg]

You can deduct your full contribution to a spousal IRA in 2014 if you as a couple have an adjusted gross income (AGI) of $181,000 or less and not covered by a retirement plan at work.

The limit to which you referred is where the deduction phase-out began for tax year 2013 for a T/P who was not covered by a retirement plan at work but whose spouse was covered by a retirement plan at work. The OP did not say that the H was covered by a plan at work, and if he wasn't, then the IRA deduction is $13,000 ($6,500 x 2) regardless of the couple's AGI ... i.e. there is no AGI limit.

[goodcat]

even if the spouse had no W2 income?

[TaxGuyBill]

even if the spouse had no W2 income?

Yes.

http://www.irs.gov/publications/p590/ch01.html#en_US_2013_publink1000230412

However, you are talking about 2013. DID she contribute to her IRA? It's now to late to contribute for 2013.

[EdCEA]

covered by retirement plan at work

OP did not state if T/P was covered by a retirement plan, but he did state that the IRA contribution was fully deductible. We then must assume that he is not covered by a retirement plan at work. The limit stated by ATSMAN of 181,000 (MAGI) is correct for 2014.

[goodcat]

ira cont.

thanks for all your answers and here's more to it.

T/P's contributed 13000. to the plan, but later told the spouse could not so they withdrew her cont of 6500.and were going t amend the return to show only one cont. (husb) the broker then refunded her cont of 6500. and won't take it back for them to deduct it.

All this money exchange and their desire to recontribute falls within the 60 day rule, but might have past the 10 15/14 extension deadline; even thought they were not under extension.

Does the 60 day rule still apply fpr them to be able to contribute? They were not covered by another plan anywhere.

[EdCEA]

need to know code on 1099-R

You need to inquire how the 2014 1099-R will be coded for the distribution. If coded as a corrective distribution (8 or P), it can't be rolled over within the 60 day window.
When did the distribution occur? If you are still within 60 days you may still be able to rollover if the 1099-R is coded 1 or 7 as it should be since this was not an excess contribution. There is no extension for contributions to 10/15/14, a contribution for 2013 had to be made by April 15 for 2013.

[Roland Slugg]

You need to inquire how the 2014 1099-R will be coded for the distribution. If coded as a corrective distribution (8 or P), it can't be rolled over within the 60 day window.

Not so. The rollover eligibility is dependent on the facts of the situation, not on the code letters and numbers that appear on the 1099-R form.

If neither H or W was covered by a plan at work, as the person who made the original post has now clarified was the case, then the 2013 IRA deduction was $13,000 if H&W were both 50 years old. If that $13,000 was contributed to H&W's respective IRAs on or before April 15, 2014 ... $6,500 to each ... then those were legitimate contributions. If the W then withdrew her funds for ANY reason, including bad advice from the broker/trustee, then that was an ordinary distribution, not a corrective distribution, and is eligible to be rolled-over or returned to the same account from which it was taken out, as long as that gets done within the 60-day time window.

It would probably be a good idea to advise the trustee of this in order to try to prevent the issuance of an incorrectly coded 1099-R form next January. The correct code should be 1 or 7, depending on the W's age, but even if it is coded 8, P or something else, it doesn't change the facts. It only means that the T/Ps may receive a CP2000 or other letter from the IRS, requiring correspondence to straighten out.

[EdCEA]

I agree, and

I agree, and that is why I suggested inquiring about the code, so that it would be correctly coded to avoid the complications. Getting the IRA custodian to issue a correct 1099-R is the better choice. Also perhaps getting a knowledgeable broker.

[Burke]

It sounds from the circumstances described that this was a legitimate contribution and Roland's answer is correct. Who told them the spouse could not contribute anyway? In re-reading your 2nd clarifying post, it can be assumed that perhaps both contributions were put into one account, i.e, the husband's? If that is the case, then the broker is right. They can't put it back in the husband's IRA. She has to have her own. If she already has one in her name with them, there may be a case for error on the part of the brokerage for putting it into the wrong account. If she put it into her account to begin with, and it was withdrawn from her account, and she is still within the 60-day time frame, then she can treat it as a rollover. Even into another plan if she has to set one up somewhere else, as long as it is in her name.

[EdCEA]

It is unlikely

It is unlikely that an IRA custodian would put both contributions into one account, unless for two separate tax years or due to clerical error. If by error, this should have been corrected as soon as known by the custodian. Should a 1099-R be issued for such error, it would be a return of excess contribution issued to the husband, and not rollover eligible. I now wonder if the wife's contribution was ever deposited to an IRA, but simply returned because it was believed an IRA contribution was not possible.

[Burke]

Hard to know, as we still need clarification on exactly what happened. However, I have seen custodians do some mighty stupid things with these, especially banks. Most of the time it is the teller, and someone who hasn't been around that long.

[goodcat]

IRA contr not accepted by broker.

You need to inquire how the 2014 1099-R will be coded for the distribution. If coded as a corrective distribution (8 or P), it can't be rolled over within the 60 day window.
When did the distribution occur? If you are still within 60 days you may still be able to rollover if the 1099-R is coded 1 or 7 as it should be since this was not an excess contribution. There is no extension for contributions to 10/15/14, a contribution for 2013 had to be made by April 15 for 2013.

Hate to keep harping on this , but the broker now wants me to tell him what code to use. My main objective is to allow my client to re contribute to the IRA which the broker returned to him because of bad advise.
Client is within the 60 days of their distribution but wants to now recontribute what was returned to him. The broker doesn't k now what code to use so he can accept the cont for 2013.
What code on the 1099 would allow the broker to accept client's cont. and allow for 2013 and not suffer premature dist. penalties nor deduction.

[Burke]

1. Did the broker include this contribution on the 5498 that was sent out for 2013 after it was made? That should match with the tax return as far as the IRS is concerned.

2. So the issue is for 2014: Brokerage made a distribution in error. Brokerage should take it back. He should show it as a rollover since you say it is within the time frame, code G to avoid any 2014 problems. Your original post was 11/11, so time is running out to meet this rule, I would think.