IRA contribution - sub-teacher & possible W2

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ps56k
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IRA contribution - sub-teacher & possible W2

Post by ps56k » Thu Sep 07, 2017 6:25 pm

Wife and I both retired... I did it very early, and wife early a year ago.
We stopped contributed to IRA the year after - as no "earned income".

SO... wife is bored, and has been doing some sub-teacher work this year within her old school district.
The pay slip appears to deduct the usual payroll items... so I'm guessing a W2 will be issued.

Just wondering if we can contribute to her IRA - the max of whatever the end of year payroll gross or net (?) will indicate ?
Might have to wait till 2018 and receive the W2 to make sure all the numbers match.
Not sure if we will make the $6,500 or even the $5,500 - will wait and see come December.

What about lonely me - if she has her "earned income" - can I also contribute the same amount to my IRA ?

tnx -
Last edited by ps56k on Thu Sep 07, 2017 6:33 pm, edited 1 time in total.

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Duckie
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Re: IRA - sub teacher & possible W2

Post by Duckie » Thu Sep 07, 2017 6:29 pm

ps56k wrote:What about lonely me - if she has her "earned income" - can I also contribute the same amount to my IRA ?
If MFJ you can contribute on her income, so if she makes more than $13K you both might be able to contribute the max.

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ps56k
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Re: IRA - sub teacher & possible W2

Post by ps56k » Thu Sep 07, 2017 6:38 pm

Duckie wrote:
Thu Sep 07, 2017 6:29 pm
If MFJ you can contribute on her income, so if she makes more than $13K you both might be able to contribute the max.
Have never run into the very low "earned income", so never thought about the IRA issue.
SO - whatever she has indicated as year end "earned income" is the MAX COMBINED for both of our potential IRA contributions...
hmmmm - say only $6,000 - wonder.... do we split it $3,000/$3,000, or put it all into one or the other account, the one with the lessor balance, etc -
Last edited by ps56k on Fri Sep 08, 2017 3:21 pm, edited 2 times in total.

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FiveK
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Re: IRA - sub teacher & possible W2

Post by FiveK » Fri Sep 08, 2017 12:10 pm

ps56k wrote:
Thu Sep 07, 2017 6:38 pm
hmmmm - say only $6,000 - wonder.... do we split it, put all into one or the other account, the one with the lessor balance, etc -
Do whatever makes you feel better. Assuming it's invested the same regardless of account, the monetary result will be identical.

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ps56k
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Re: IRA contribution - sub-teacher & possible W2

Post by ps56k » Tue Nov 14, 2017 1:20 am

but - just to clarify - we can only contribute the total max of whatever is reported as Gross Income on the W2 - not double dipping -
Last edited by ps56k on Sat Jan 27, 2018 10:21 pm, edited 1 time in total.

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FiveK
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Re: IRA contribution - sub-teacher & possible W2

Post by FiveK » Tue Nov 14, 2017 1:57 am

ps56k wrote:
Tue Nov 14, 2017 1:20 am
but - just to clarify - we can only contribute the max of whatever is reported as income on the W2 - not double dipping -
Correct.

Note that if her pay is documented with a 1099-MISC instead of a W-2 (depends on whether she is an "independent contractor" or an "employee"), you have to subtract 1/2 of the self-employment tax from her net self-employment income to get "taxable compensation."

Your MAGI calculation for Roth IRA purposes is https://www.irs.gov/publications/p590a/ ... 1000230988

See more about "taxable compensation" at https://www.irs.gov/publications/p590a# ... 1000230355

ivk5
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Re: IRA contribution - sub-teacher & possible W2

Post by ivk5 » Tue Nov 14, 2017 2:02 am

No insight into rest of income/asset picture but you may want to consider Roth rather than traditional IRA contribution if current marginal tax rate is low and will increase in future due to RMDs etc.

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ps56k
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Re: IRA contribution - sub-teacher & possible W2

Post by ps56k » Sat Jan 27, 2018 10:20 pm

Received her W-2 today - for 2017 -
it was for $9,200 - Gross pay -
So.... I could max out her T-IRA at $6,500,
and contrib to my T-IRA with the remaining $2,700.

Will look at the Roth issues at another time... as the future of RMDs may well push us into the next tax bracket

DSInvestor
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Re: IRA contribution - sub-teacher & possible W2

Post by DSInvestor » Sat Jan 27, 2018 10:38 pm

ps56k wrote:
Sat Jan 27, 2018 10:20 pm
Received her W-2 today - for 2017 -
it was for $9,200 - Gross pay -
So.... I could max out her T-IRA at $6,500,
and contrib to my T-IRA with the remaining $2,700.

Will look at the Roth issues at another time... as the future of RMDs may well push us into the next tax bracket
If your overall tax situation is such that you have little or no tax liability, consider contributing to Roth IRA instead of Traditional IRA. Something to consider if you have not yet started pensions or social security and are living off a taxable account (LTCG and QDI).

If she has access to Roth 401k/403b/457b, there may be a possibility to double dip on retirement contributions. For example, she contributes 8K to Roth 401k/403b/457b at work which still results in $9200 in W-2 box 1. W2-box 1 flows into 1040 line 7, so that would allow another $9200 to be contributed to your IRAs. It's too late to contribute to workplace plan for 2017 but it's something to consider for 2018.

This trick would not work for Traditional 401k/403b/457b contributions. If she contributed 8K to Trad 401k/403b/457b, that reduces her W-2 box 1 to $1200. This would only allow $1200 in IRA contributions.
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sport
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Re: IRA contribution - sub-teacher & possible W2

Post by sport » Sat Jan 27, 2018 10:59 pm

If you are going to contribute to traditional IRAs for both of you, and you do not have enough to fund both to the maximum amount, there would be an advantage to fund the younger spouse more than the older spouse. The reason for this is that RMDs will start later and will be smaller for the younger spouse.

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