ILLMAS Posted February 28, 2012 Report Share Posted February 28, 2012 If MFJ couple phases out because of MAGI, can they still put money in the IRA even though they cannot deduct it? Quote Link to comment Share on other sites More sharing options...
Lion EA Posted February 28, 2012 Report Share Posted February 28, 2012 Yes, a nondeductible IRA. It still defers paying tax on the earnings. Form 8606 to report their basis. Maybe convert to a Roth... Quote Link to comment Share on other sites More sharing options...
Pacun Posted February 28, 2012 Report Share Posted February 28, 2012 Check the Roth IRA option since it will be non-deductible. Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted March 2, 2012 Report Share Posted March 2, 2012 IMO, Roth is definitely the way to go since the contribution will be non-deductible. But if they insist on using a traditional IRA account for non-tax reasons, remember that the 8606 is required not just this year, but every year from now on to track the basis that they have in the traditional IRA. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 2, 2012 Report Share Posted March 2, 2012 Due to income OP said Roth contributions are phased out. But they qualify (earned income, etc.) to make traditional contributions. With no more phase outs for CONVERSIONS, they can convert to a Roth immediately. If no other traditional contributions over the years, they won't have to worry about earnings, ratios of with vs without basis, etc. Back door Roth. 1 Quote Link to comment Share on other sites More sharing options...
JohnH Posted March 29, 2012 Report Share Posted March 29, 2012 I had an occasion to use the Roth IRA worksheet in ATX today, and it's very helpful when the client is in the phase-out range. Sure beats doing it using paper and pencil, and produces a nice report to hand to the client. Well-done ATX. Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 29, 2012 Report Share Posted March 29, 2012 Due to income OP said Roth contributions are phased out. But they qualify (earned income, etc.) to make traditional contributions. With no more phase outs for CONVERSIONS, they can convert to a Roth immediately. If no other traditional contributions over the years, they won't have to worry about earnings, ratios of with vs without basis, etc. Back door Roth. I have clients who are doing the "back door Roth" trick. Also keep in mind those 8606's for STATE returns!! Mass. (for example) has never recognized the IRA deduction from income, so for state purposes, we have to track basis anyway. My older clients just -love- this little tidbit when I tell them. Some started contributing to IRA's when they first came out and now have to reconstruct their contributions (because they didn't know to track them). Quote Link to comment Share on other sites More sharing options...
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