Nondeductible IRA

[superman]

Client can not make a traditional IRA contribution due to income limitions but wants to make a nondeductible IRA contribution. He called the broker and they told him there is no such tool. Am I wrong because on ttb page 13-13 it shows about nondeductiable
IRAs. Our goal is next yr make this recharatize this as a ROTH contribuation. Any help is appriciated.

Superman

[Safire]

Why not just do a roth this year? Since he cannot deduct it anyway.

[ChEAr$]

why wait?

Client can not make a traditional IRA contribution due to income limitions but wants to make a nondeductible IRA contribution. He called the broker and they told him there is no such tool. Am I wrong because on ttb page 13-13 it shows about nondeductiable
IRAs. Our goal is next yr make this recharatize this as a ROTH contribuation. Any help is appriciated.

Superman

IOW, why do a non deductible IRA contribution for 2007 (which can be done within applicable
limits) and switch it next year? Why not go ahead into the ROTH for 2007?

[JoshinNC]

There are nondeductible IRA's

Client can not make a traditional IRA contribution due to income limitions but wants to make a nondeductible IRA contribution. He called the broker and they told him there is no such tool. Am I wrong because on ttb page 13-13 it shows about nondeductiable
IRAs. Our goal is next yr make this recharatize this as a ROTH contribuation. Any help is appriciated.

Superman

but most brokerages don't call them that. It is simply a Traditional IRA that the TP does not take a deduction for because of the income limitation. The brokerage has no idea whether the client can or cannot take the deduction, so they don't make a differenitation. I agree with the other posters that if the client is eligible for a ROTH then that is what he/she should do. If not eligible than they should just open a Traditional IRA and then you, as the tax pro, do not take the deduction. Hence, it becomes a NONDEDUCTIBLE IRA.

[Peachie]

To answer your question

Client can not make a traditional IRA contribution due to income limitions but wants to make a nondeductible IRA contribution. He called the broker and they told him there is no such tool. Am I wrong because on ttb page 13-13 it shows about nondeductiable
IRAs. Our goal is next yr make this recharatize this as a ROTH contribuation. Any help is appriciated.

Superman

You can make a nondeductible contribution to an IRA, use form 8606.

[David1980]

Why not just do a roth this year? Since he cannot deduct it anyway.

Could be beyond the income limit for a roth contribution. If you make too much you can't make a Roth IRA contribution at all, however you can make a nondeductible traditional IRA contribution. Of course if you make too much to do a Roth contribution you'd also be making too much to do a Roth conversion. Unless you expected your income to fall in which case you may be above the limit for a Roth contribution in the year of contribution and below the MAGI limit for a conversion the next year and able to convert it to a Roth.

[JoshinNC]

there is no conversion limit

Could be beyond the income limit for a roth contribution. If you make too much you can't make a Roth IRA contribution at all, however you can make a nondeductible traditional IRA contribution. Of course if you make too much to do a Roth contribution you'd also be making too much to do a Roth conversion. Unless you expected your income to fall in which case you may be above the limit for a Roth contribution in the year of contribution and below the MAGI limit for a conversion the next year and able to convert it to a Roth.

in 2010 (currently) and you can spread the ensuing tax over 2 tax years. Just a planning tip.