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2005 Tax Year |
Keyword: Contributions (IRAs & Pension Plans)
This is archived information that pertains only to the 2005 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
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. Generally,
if your employer's plan has a separate account for each employee, it is 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, a defined benefit plan, the employer must make
enough contributions (together with earnings) to provide the retirement benefit
promised in the retirement 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. It does not matter if you are vested.
The Form W-2 (PDF) 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.
What is the maximum amount that I can contribute to my 401(k) plan?
The maximum amount an employee can contribute to a 401(k) plan is determined
annually. You may be allowed catch up contributions in addition to annual
limit, if you are age 50 or older. Refer to "Elective Deferrals" in Publication 525 Taxable and Nontaxable Income. The maximum
amount applies to an employee's aggregate pre-tax contributions to a 401(k)
plan and 403(b) plan. There are several different limits that apply to a 401(k)
plan in addition to the overall contribution limit. These limits, your salary
and the type of 401(k) plan to which you are contributing may limit your 401(k)
contributions to a lesser amount.
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.
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 traditional IRA.
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 chapter
2 Publication 590, Individual Retirement Arrangements
(IRAs), 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.
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 to a separate traditional IRA. The amount that you can
contribute to each IRA is subject to a limit. Refer to chapter 1 of Publication
590 for more information on these limits. Contributions can be made even if
one spouse has little or no compensation, if you file a joint return. You
can make a contribution 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 by certain factors such as your taxable compensation,
contributions to a traditional or Roth IRA and your age.
For additional information, refer to Tax Topic 451, Individual
Retirement Arrangements (IRAs), or Publication 590, Individual
Retirement Arrangements (IRAs) .
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
in the year you make the contribution. 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.
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