Form 5498, Ira Contribution Info

[zeros]

My client just received this form from her bank. Grandmother had contributed $1000.00 to her IRA account for 2007. Is there any action required as a result of this form? She did not deduct it as she had no taxably income.

[OtisMozzetti]

Need compensation in order to contribute to IRA

Several questions should be answered in order to best respond to this question:

1. Did grandmother earn any "compensation" which means wages, salaries, tips, net self-employment income, or alimony during the year for which the contributions were made?

2. What was grandmother's age? Had she reached age 70-1/2 by the end of the year?

3. Did grandmother perhaps already have a traditional IRA or a Roth IRA account?

[newbie]

Did grandma contribute to grandchild's IRA? Or to grandma's IRA?

If to grandma proceed to answer OtisMozzetti's questions. If to grandchild's, did child have earned income?

[zeros]

Clarification

Grandma contributed to grandchild's IRA. Yes, granddaughter has earned income but no taxable income. Sorry for the confusion.

[S T]

Ira

Thank you Grandma for the contribution! to my IRA account!

On grand daughters return, wouldn't you want to report this on form 8606 and make it a non deductible IRA contribution, since there is no tax benefit?

Sandy

[Bees Knees]

On grand daughters return, wouldn't you want to report this on form 8606 and make it a non deductible IRA contribution, since there is no tax benefit?

Yes, that is a good suggestion. Even better would have been to make it a Roth IRA.

[les grans]

Can you still recharacterize this contribution as a Roth contribution?

[sea-tax]

Yet one more example why our clients need us when it comes to making investment decisions and why we should all be licensed to offer these services.