Ira contribution

[Roy]

T/P has a 403(b) retirement plan at work. But he has not contributed to it and did not contribute in 2016. Is he able to open an IRA account and contribute $6,500 (he is over 50) for 2016?
Roy

[Burke]

If he did not participate in it all year, the "retirement plan" box should not be checked, and he could contribute to an IRA, if eligible.

[Roy]

Ira deductibility

That's the problem. The box was checked even though he did not participate in the retirement plan. Do you think, it would work for me to uncheck the box within my tax software input or should he ask for a corrected W-2? Thanks.

[TaxGuyBill]

Did the employer contribute anything to it?

If not, then I would have the taxpayer ask for a corrected W-2. If it is not corrected, the taxpayer will get an IRS notice denying the IRA deduction if his income is too high.

[Roy]

Ira deductibility

Thank you, I just shot him an email, asking him to have a "Corrected W-2" issued with the box, NOT checked. Thanks to all for their indulgence and advice.

[FEDUKE404]

And the Form W-2 says ??

That's the problem. The box was checked even though he did not participate in the retirement plan. Do you think, it would work for me to uncheck the box within my tax software input or should he ask for a corrected W-2? Thanks.

"The box was checked" - I think you just answered your own question.

". . .would work for me to uncheck the box?" - This **IS** a joke, correct??

You may wish to review the IRS instructions for Box 13 of Form W-2, to include:

Retirement plan. Check this box if the employee was an “active participant” (for any part of the year) in any of the following.
1. A qualified pension, profit-sharing, or stock-bonus plan described in section 401(a) (including a 401(k) plan).
2. An annuity plan described in section 403(a).
3. An annuity contract or custodial account described in section 403(b).
4. A simplified employee pension (SEP) plan described in section 408(k).
5. A SIMPLE retirement account described in section 408(p).
6. A trust described in section 501(c)(18).
7. A plan for federal, state, or local government employees or by an agency or instrumentality thereof (other than a section 457(b) plan).

Generally, an employee is an active participant if covered by (a) a defined benefit plan for any tax year that he or she is eligible to participate in or (b) a defined contribution plan (for example, a section 401(k) plan) for any tax year that employer or employee contributions (or forfeitures) are added to his or her account.

FE

[TaxGuyBill]

The chart on page 29 of the instructions make it clear that if neither employee or employer contributes to the 403(b), the box should not be checked.

https://www.irs.gov/pub/irs-pdf/iw2w3.pdf#page=29

[Roland Slugg]

You CAN'T be serious! Change the W-2? Ask for a "corrected" one? I would lay long odds ... I do live in Nevada, after all ... that the W-2 with the "Ret Plan" box X'd is correct.

The vast majority of 403(b) plans are for school or hospital employees. Virtually 100% of schools and probably close to 100% of hospitals have a pension/retirement plan that's funded in full or in large part by the employer. Just because the employee doesn't make pre-tax deferrals himself doesn't mean he's not covered by a retirement plan.

[kathyc2]

The chart on page 29 of the instructions make it clear that if neither employee or employer contributes to the 403(b), the box should not be checked.

https://www.irs.gov/pub/irs-pdf/iw2w3.pdf#page=29

There may be another retirement plan in effect such as profit sharing as to the reason the box is checked.

[TaxGuyBill]

There may be another retirement plan in effect such as profit sharing as to the reason the box is checked.

Good point.