5.1 Pensions and Annuities: General
Am I considered covered by an employer sponsored retirement plan
for the year if I do not participate in the plan or if I did not work long
enough to be vested?
The answer to this question depends on your type of retirement plan. If
your employer's plan has a separate account for each employee. This is called
a defined contribution plan if any amount was contributed or allocated by
you or your employer to your account, you are considered covered. It does
not matter if you have worked long enough to be vested.
In the other type of plan, the plan employer must make enough contributions
(together with earnings) to provide the retirement benefit promised in the
retirement plan. This is called a defined benefit plan. In this type of plan,
if you meet the minimum age and years of service requirements to participate
in your employer's plan, you are considered covered even if you decline coverage.
It does not matter if you are vested.
The Form W-2 you receive from your employer has a box used to indicate
whether you were covered for the year. The "Pension Plan" box should have
a mark in it if you were covered.
References:
5.2 Pensions and Annuities: Contributions
What is the maximum amount that I can contribute to my 401(k) plan?
For 2003, the maximum amount an employee can contribute to a 401(k) plan
is $12,000 except for catch-up contributions for employees age 50 or over
(see the next topic). There are several different limits that apply to a 401(k)
plan in addition to the overall contribution limit. The maximum you can contribute
will depend on your salary and the type of 401(k) plan to which you are contributing.
The rules for retirement plans are complex. Your plan administrator should
have written information about your particular plan that explains these limitations
as well as other regulations that apply.
For further information, refer to Tax Topic 424, 401(k) plans.
References:
What is the 2003 limit for elective deferrals to 401(k) plans?
Elective deferrals into a section 401(k) plan are limited to $12,000 for
2003, except that employees age 50 or over may be eligible to make an additional
contribution of up to $2000 in 2003. SeeTax Topic 424 401(K) plans,
for more information.
References:
How is the dollar limit for 403(b) plans affected by the nondiscrimination
requirements related to highly compensated employees?
A 403(b) plan is a tax-sheltered annuity plan for employees of public schools
and certain tax-exempt organizations. Under a special coverage and nondiscrimination
rule, if any employee may make elective deferrals, the plan is considered
discriminatory unless the opportunity to make contributions deferrals of more
than $200 pursuant to a salary reduction agreement is available to all employees
on a basis that does not discriminate in favor of highly compensated employees.
For more information, refer to Internal Revenue Code section 403(b)(1)(D),(12)(A)(ii).
The maximum elective deferral for 2003 that an employee may make to a 403
(b) plan is $12,000. This maximum limit applies to an employee's aggregate
pre-tax contributions to a 403 (b) plan and section 401 (k) plan. This maximum
limit will increase by $1,000 each year through 2006. If you have at least
15 years of service with a public school system, hospital, home health service
agency, health and welfare agency, church or convention or association of
churches (or associated organization), the general limit on elective deferrals
may be increased by up to $3,000 (See Publication 571 chapter
4). In addition, employees age 50 or over may be eligible to make catchup
contributions of $2000 in 2003 (see Publication 571 chapter
6).
For more information about 403 (b) plans, refer to Publication 571, Tax
Sheltered Annuity Plans 403 (b) Plans.
References:
- Publication 571, Tax Sheltered Annuity Plans 403 (b)
Plans
- IRS Code Sec. 402(g) (1)
17.3 Individual Retirement Arrangements (IRAs): Roth IRA
Do I report my nondeductible Roth IRA contributions on Form 8606?
There are no forms to report a Roth contribution. The financial institution,
which is the trustee of your Roth IRA, will send you information on the amount
in your Roth IRA. They will also send the information to the Internal Revenue
Service. Use Form 8606 (PDF), Nondeductible
IRAs, if you made a nondeductible contribution to a traditional IRA;
converted from a traditional IRA, a SEP, or Simple IRA to a Roth IRA, received
a distribution from a traditional IRA, a SEP, or a Simple IRA and made nondeductible
contributions to a traditional IRA, or received a distribution from a Roth
or IRA.
References:
Can a person make a contribution to a SEP-IRA and a Roth IRA, too?
Yes, you can make a contribution to a SEP-IRA and a Roth IRA. See Publication 590, Individual Retirement Arrangements, for
the requirements to contribute to a SEP and a Roth IRA. However, your SEP
IRA contribution and Roth IRA contribution can not be made to the same IRA.
References:
17.4 Individual Retirement Arrangements (IRAs): Traditional IRA
Can an individual who is contributing to a SEP-IRA also contribute
to a traditional IRA?
Yes, if they meet certain requirements. A SEP-IRA is considered a retirement
plan, so the Adjusted Gross Income (AGI) limitations have to be considered.
If your AGI, which is computed after the SEP contribution, is in excess of
those limits, then the IRA contribution that you make would be nondeductible.
The information on the AGI limits is in Publication 590, Individual
Retirement Arrangements (IRAs) , in the section How Much Can I Deduct? Your
SEP IRA Contribution and Traditional IRA Contribution may both be made to
your SEP IRA.
References:
I want to establish a traditional individual retirement arrangement
(IRA) for my spouse, and I need additional information. What is the most I
can contribute to a spousal IRA during the tax year?
If both you and your spouse work and both have taxable compensation, each
of you can contribute up to $3,000 (or the amount of each IRA owner's compensation,
if less) to a separate traditional IRA. Even if one spouse has little or no
compensation, up to $3,000 can be contributed to each IRA if combined compensation
is at least equal to the amount contributed to both IRAs and you file a joint
return. You can contribute $3,000 to a separate IRA for your nonworking spouse
if you file a joint return. Your total contribution to both your IRA and
the spousal IRA for this year is limited to the smaller of $6,000, or your
taxable compensation reduced by any contributions you make to a traditional
IRA or Roth IRA. You cannot contribute more than $3,000 to either IRA for
the year. If you are 50 or older in 2003, the most that can be contributed
to your traditional IRA for 2003 is the lesser of:
. $3,500 (up from $2,000), or
. Your compensation that you must include in income.
For additional information, refer to Tax Topic 451, Individual
Retirement Arrangements (IRAs), or Publication 590, Individual
Retirement Arrangements (IRAs) .
References:
Can I take an IRA deduction for the amount I contributed to a 401(k)
plan last year?
No. A 401(k) plan is not an IRA. However, the amount you contributed is
not included as income in box 1 of your W-2 form so you don't pay tax on it
for 2003. For more information, refer to Tax Topic 424, 401(k) Plans, Publication 575, Pension and Annuity Income, or Publication 560, Retirement
Plans for Small Business.
References:
If I am covered by a employer sponsored retirement plan for part
of the year, but work the rest of the year for an employer without a retirement
plan, how much of my earnings may I deduct for a traditional IRA?
The amount you can deduct will be determined by your modified Adjusted
Gross Income (AGI) and filing status. For specific information refer to Publication 590, Individual Retirement Accounts (IRAs).
References:
Tax Topics & FAQs | 2003 Tax Year Archives | Tax Help Archives | Home
