Roth IRA contribution limit
ehw6
contribution of $3000 to my 2005 Roth IRA before the April 17 2006
deadline thinking the limit for me was $4000 (I don't have other
retirement accounts such as traditional IRA, etc). The other day I was
reading Publication 590 and realized I might have made a mistake.
Here's what Pub. 590 says about the Roth IRA contribution limit:
Roth IRA contribution limit. If contributions were made on your behalf
only to
Roth IRAs, your contribution limit for 2005 is generally the lesser
of:
.$4,000, or
.Your taxable compensation for the year.
The term "taxable compensation" in the second one is very confusing to
me. My modified AGI for Roth IRA purposes was low enough so it
shouldn't affect anything. My uncertainty is the following. My AGI
(line 37 of Form 1040) was so low that after taking the $5000 standard
deduction and $3200 exemption my taxable income (line 43 of Form 1040)
was zero, which means I got all my year 2005 income tax back. Do this
mean my "taxable compensation" for 2005 was also zero and thus I should
have made zero contribution to my 2005 Roth IRA since zero is the
lesser of $4000 and my taxable compensation for the year? Pub. 590
only gives the definition of "compensation", not "taxable
compensation". I'm guessing the latter is different than another term
"taxable income" because tax laws usually use terms precisely. I even
email IRA and got a reply. But in the reply the employee went on and
on with explanations about "compensation" instead of "taxable
compensation", which didn't answer my question at all. So I'm turning
to this forum to seek some clarifications on my uncertainty. Please
help me find out what my contribution limit for 2005 Roth IRA really
was. Thanks a lot!
Wen
Phil Marti
>I have a question regarding the Roth IRA contribution limit. I made a
> contribution of $3000 to my 2005 Roth IRA before the April 17 2006
> deadline thinking the limit for me was $4000 (I don't have other
> retirement accounts such as traditional IRA, etc). The other day I was
> reading Publication 590 and realized I might have made a mistake.
> Here's what Pub. 590 says about the Roth IRA contribution limit:
>
> Roth IRA contribution limit. If contributions were made on your behalf
> only to
> Roth IRAs, your contribution limit for 2005 is generally the lesser
> of:
> .$4,000, or
> .Your taxable compensation for the year.
>
> The term "taxable compensation" in the second one is very confusing to
> me.
From the 1040:
Add lines 7, 11 and 12;
Subtract from that lines 27 and 28;
The result is your taxable compensation.
--
Phil Marti
Clarksburg, MD
Arthur Kamlet
ehw6 <hep...@hotmail.com> wrote:
>I have a question regarding the Roth IRA contribution limit. I made a
>contribution of $3000 to my 2005 Roth IRA before the April 17 2006
>deadline thinking the limit for me was $4000 (I don't have other
>retirement accounts such as traditional IRA, etc). The other day I was
>reading Publication 590 and realized I might have made a mistake.
>Here's what Pub. 590 says about the Roth IRA contribution limit:
>
>Roth IRA contribution limit. If contributions were made on your behalf
>only to
> Roth IRAs, your contribution limit for 2005 is generally the lesser
>of:
> .$4,000, or
> .Your taxable compensation for the year.
>
>The term "taxable compensation" in the second one is very confusing to
>me.
You are so close, too!
You obviously have access to IRS Pub 590. Looking for
"Compensation" in the index at the back of the book, points
you to page 8. Page 8 tells you what is and is not taxable
compensation.
--
__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH
ehw6
only specifies what is and what is not compensation while taxable
compensation is what concerns me. Any further advice? Thanks.
ehw6
Pub 590 statement simply as the lesser of $4000 or my compensation for
the year. Then the word "taxable" in "Your taxable compensation for
the year" would be totally redundant. But we can hardly say so about
tax laws. So why's the word taxable put in the original sentence in
Pub 590? Does it not make any difference? Your further clarification
on this matter would be highly appreciated.
Arthur Kamlet
ehw6 <hep...@hotmail.com> wrote:
>Thanks, Arthur. I read Pub 590 just as you advised. But on page 8 it
>only specifies what is and what is not compensation while taxable
>compensation is what concerns me. Any further advice? Thanks.
Page 8 "compemnsation" is indeed taxable compensation.
Why the Pub uses taxable compensation one place and just plain
compensation another, when speaking fo the same thing, I won't try
to explain.
Phil Marti
> If I understand your reply correctly, I should take the
> Pub 590 statement simply as the lesser of $4000 or my compensation for
> the year.
It's your compensation minus such things that keep such compensation from
ever getting into AGI, for example, 401(k) contributions. It does not take
into account standard or itemized deductions or personal exemptions.
You seem to be wanting metaphysical certitude. You're not going to get it
in this forum, at least not from me. If you want it, hire a professional
whom you can pursue if the answer is wrong.
If you had enough line 7 income to cover the amount of your IRA
contribution, you're fine. That is my last comment on the subject unless
you didn't, in which case provide some numbers from the lines I mentioned
before.