IRA contribution Question

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crazyapple11
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Joined: Thu Jun 05, 2014 10:40 am

IRA contribution Question

Post by crazyapple11 » Thu Jan 02, 2020 12:04 pm

I wondered whether anyone here can help me with an IRA contribution question. Assuming my salary in 2019 is $1,000. I only received $800 because my employer withheld $200 due to Social Security and Medicare. Can I contribute the whole $1,000 to an IRA account or I can only contribute $800? Any input are greatly appreciated!

Silk McCue
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Re: IRA contribution Question

Post by Silk McCue » Thu Jan 02, 2020 12:10 pm

You use your gross earned income, so $1000 in your example. The numbers you provided are clearly fictitious as SS & Medicare would not be that much on $1000 gross.

Cheers

Topic Author
crazyapple11
Posts: 78
Joined: Thu Jun 05, 2014 10:40 am

Re: IRA contribution Question

Post by crazyapple11 » Thu Jan 02, 2020 12:14 pm

Got it. Thanks a ton!

stingray777
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Re: IRA contribution Question

Post by stingray777 » Sat Jan 04, 2020 11:35 am

It would be great if someone can confirm it. I don't think it is possible, but...

I already made my $6000 contribution out of my bank account into traditional IRA for 2019. Because the calendar year 2019 is gone, I cannot transfer $3000 into Roth IRA for 2019 any more, right?

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Brianmcg321
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Re: IRA contribution Question

Post by Brianmcg321 » Sat Jan 04, 2020 11:39 am

stingray777 wrote:
Sat Jan 04, 2020 11:35 am
It would be great if someone can confirm it. I don't think it is possible, but...

I already made my $6000 contribution out of my bank account into traditional IRA for 2019. Because the calendar year 2019 is gone, I cannot transfer $3000 into Roth IRA for 2019 any more, right?
You have until April 15th 2020 to make a 2019 contribution.

If you already contributed the max for 2019, you can't put more in for that year. Just put in $3,000 for 2020.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.

sport
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Re: IRA contribution Question

Post by sport » Sat Jan 04, 2020 11:45 am

stingray777 wrote:
Sat Jan 04, 2020 11:35 am
It would be great if someone can confirm it. I don't think it is possible, but...

I already made my $6000 contribution out of my bank account into traditional IRA for 2019. Because the calendar year 2019 is gone, I cannot transfer $3000 into Roth IRA for 2019 any more, right?
The contribution limit for IRAs applies to the sum of TIRA and Roth IRA contributions.

stingray777
Posts: 77
Joined: Sun Dec 08, 2019 2:57 pm

Re: IRA contribution Question

Post by stingray777 » Sat Jan 04, 2020 12:04 pm

sport wrote:
Sat Jan 04, 2020 11:45 am
stingray777 wrote:
Sat Jan 04, 2020 11:35 am
It would be great if someone can confirm it. I don't think it is possible, but...

I already made my $6000 contribution out of my bank account into traditional IRA for 2019. Because the calendar year 2019 is gone, I cannot transfer $3000 into Roth IRA for 2019 any more, right?
The contribution limit for IRAs applies to the sum of TIRA and Roth IRA contributions.
I'm sorry, I was not very clear.
I put $6000 out of my savings account into T-IRA in December for 2019. Can I take $3000 from it and put it into Roth IRA for 2019 even though calendar year is over? I understand that you can contribute until April.

Silk McCue
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Joined: Thu Feb 25, 2016 7:11 pm

Re: IRA contribution Question

Post by Silk McCue » Sat Jan 04, 2020 12:21 pm

stingray777 wrote:
Sat Jan 04, 2020 12:04 pm

I'm sorry, I was not very clear.
I put $6000 out of my savings account into T-IRA in December for 2019. Can I take $3000 from it and put it into Roth IRA for 2019 even though calendar year is over? I understand that you can contribute until April.
The only proper way to do this is to ask your broker to recharacterize $3000 and associated earnings to Roth. Any other approach, such as pulling the money out, is going to cause you problems. As it is reporting this will be more interesting.

IMHO you would be better off leaving it as is and putting $6k into 2020 Roth this year as soon as you are able.

Cheers

stingray777
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Joined: Sun Dec 08, 2019 2:57 pm

Re: IRA contribution Question

Post by stingray777 » Sat Jan 04, 2020 12:54 pm

Silk McCue wrote:
Sat Jan 04, 2020 12:21 pm
stingray777 wrote:
Sat Jan 04, 2020 12:04 pm

I'm sorry, I was not very clear.
I put $6000 out of my savings account into T-IRA in December for 2019. Can I take $3000 from it and put it into Roth IRA for 2019 even though calendar year is over? I understand that you can contribute until April.
The only proper way to do this is to ask your broker to recharacterize $3000 and associated earnings to Roth. Any other approach, such as pulling the money out, is going to cause you problems. As it is reporting this will be more interesting.

IMHO you would be better off leaving it as is and putting $6k into 2020 Roth this year as soon as you are able.

Cheers
I will call up the broker and see if they do this all the time, and it is relatively simple. Thank you!

stingray777
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Joined: Sun Dec 08, 2019 2:57 pm

Re: IRA contribution Question

Post by stingray777 » Mon Jan 06, 2020 9:01 pm

I called and was told that it was too late once you hit January. Too bad.

TropikThunder
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Re: IRA contribution Question

Post by TropikThunder » Mon Jan 06, 2020 11:23 pm

stingray777 wrote:
Mon Jan 06, 2020 9:01 pm
I called and was told that it was too late once you hit January. Too bad.
Your broker is not correct. Per the IRS (emphasis added):
What is a recharacterization of a contribution to a traditional or Roth IRA?
A recharacterization allows you to treat a regular contribution made to a Roth IRA or to a traditional IRA as having been made to the other type of IRA. A regular contribution is the annual contribution you’re allowed to make to a traditional or Roth IRA: up to $5,500 for 2018, $6,500 if you’re 50 or older (see IRA Contribution Limits for details). It does not include a conversion or any other rollover.

How do I recharacterize a regular IRA contribution?
To recharacterize a regular IRA contribution, you tell the trustee of the financial institution holding your IRA to transfer the amount of the contribution plus earnings to a different type of IRA (either a Roth or traditional) in a trustee-to-trustee transfer or to a different type of IRA with the same trustee. If this is done by the due date for filing your tax return (including extensions), you can treat the contribution as made to the second IRA for that year (effectively ignoring the contribution to the first IRA).
https://www.irs.gov/retirement-plans/ir ... tributions

Due date for filing 2019 taxes is Apr 15 (unless you request an extension) so you have until then to recharacterize it. Which brokerage? Maybe another poster will have done one at that brokerage and can advise if there are any particular hurdles to be aware of.

Katietsu
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Re: IRA contribution Question

Post by Katietsu » Mon Jan 06, 2020 11:33 pm

stingray777 wrote:
Mon Jan 06, 2020 9:01 pm
I called and was told that it was too late once you hit January. Too bad.
I am afraid you are using the wrong terminology or there was a miscommunication. Or a misinformed customer service representative.

You can not convert from traditional to Roth in 2020 and have it count for 2019.

You can recharacterize your 2019 contribution and associated earnings from a traditional IRA to a Roth IRA through at least April 15. If I understand your situation correctly, in your case, you would ask to recharacterize $3000 plus associated earnings from your 2019 contribution made on the month of X, day of Y, 2019 from your traditional IRA to your Roth IRA.

You can not recharacterize anything except your 2019 contribution (or 2020) at this time.

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