Traditional IRA Contribution

[taxdan]

Just to make sure I'm correct on this...

Even if a person was employed for only a couple weeks at the beginning of the year before switching jobs and that person was an "active participant" in the previous employer's retirement plan (as marked on the W-2) and not at the new employer for the remaining 11 1/2 months of the year, that person can NOT make a deductible contribution to an IRA. (Total agi over the limit)

Is that correct?

[mcb39]

Quickfinders P. 14-6 Defined benefit plan. "An employee is considered an active participant if he is eligible to participate for the plan year that ends within the employee's tax year This is true even if the employee declines to be covered by the plan, did not make contributions or did not perform the minimum service required to accrue a benefit for the plan year. There is no de minimus exception to the active participatint rules. An employee can be considered an active participant in a plan no matter how small the employee's accrued benefit in the plan.

So, I would say that your client does not qualify on both counts....the retirement plan and the total agi over the limit.

[taxdan]

Thank you for the response. That's what I figured.

It still shocks me that even if you're an "active participant" for only a day, you can't make a deductible contribution.

[jklcpa]

Active participation also includes being allocated a forfeiture, even though the employee isn't contributing during the given year. I've seen that too, and the person was shocked to see the block checked on his W-2.