Individual Retirement Accounts Still Cause for Confusion
Porter, Syliva, THE JOURNAL RECORD
With assistance of Prentice Hall tax attorney Eli J. Warach, I've worked up some dollar-saving answers that might work for you.
Q. I was eligible to contribute to an IRA in 1988, but I didn't make the payment before the end of the year. Did I miss the boat?
A. No. You still have time to set up or contribute to a 1988 IRA. You have until April 17, 1989.
Q. Neither my wife nor I belong to an employer-sponsored retirement plan. How much can we contribute to an IRA?
A. You can put in up to $2,000 each - provided you earn at least $2,000 each - and deduct what each of you contributes. That's true no matter how high your income is.
Q. Wait. Aren't deductible contributions to IRAs knocked out for people earning more than a certain amount?
A. That's right and wrong. Let's try to clear away the confusion.
1. If neither spouse is an active participant in a retirement plan, the deduction limits are as stated above.
2. A taxpayer who is married and files a joint return will be treated as an active participant in a plan if the taxpayer's spouse is an active participant in a plan. These taxpayers also are subject to additional limitations.
Q. If a single taxpayer, spouse or both spouses belong to retirement plans, what are the contributions and deduction limits?
A. They fall into three separate categories: married filing joint returns; single; and married filing separate returns.
There are different rules for each. Let's start with married couples filing joint returns: The key rule - one you must remember - is this: If one belongs to a retirement plan, both belong for tax purposes.
Couples who participate in a retirement plan and who have a combined adjusted gross income of $40,000 or more, start losing deductions for IRAs at a rate of $200 worth of deductions for each $1,000 of adjusted gross income. …