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Posted by Melinda Simon on August 7, 2008, 12:38 pm
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I'm 54, working part-time, and my partner's income covers our current
needs. I'm putting 100% of my salary away in a 403b (it won't even hit
the $20,500 max). I also have some inherited annuities that I need to
cash in, which will give me about $15K taxable income. Since I'm not
taking anything home from my job, can I put any of the net from these
annuities into a Roth IRA? ie: does one have to have actual payroll-
earned income to put into a Roth?
thanks much
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Posted by Alan on August 7, 2008, 1:00 pm
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Melinda Simon wrote:
> I'm 54, working part-time, and my partner's income covers our current
> needs. I'm putting 100% of my salary away in a 403b (it won't even hit
> the $20,500 max). I also have some inherited annuities that I need to
> cash in, which will give me about $15K taxable income. Since I'm not
> taking anything home from my job, can I put any of the net from these
> annuities into a Roth IRA? ie: does one have to have actual payroll-
> earned income to put into a Roth?
>
> thanks much
>
An IRA (Roth or Traditional) require you to have taxable
compensation. This includes pay for your services (basically the
amount in Box 1 of your W-2) as an employee as well as
self-employment income (net earnings less the deduction for
retirement plan contributions less the deduction for 1/2
self-employment taxes). In addition, alimony and nontaxable
combat pay may also qualify you to make an IRA contribution.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Paul Thomas, CPA on August 7, 2008, 2:49 pm
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> I'm 54, working part-time, and my partner's income covers our current
> needs. I'm putting 100% of my salary away in a 403b (it won't even hit
> the $20,500 max). I also have some inherited annuities that I need to
> cash in, which will give me about $15K taxable income. Since I'm not
> taking anything home from my job, can I put any of the net from these
> annuities into a Roth IRA? ie: does one have to have actual payroll-
> earned income to put into a Roth?
You're not putting "all" of your salary in a 403(b) if there is any taken
out for Social Security or Medicare. You may be thinking of the net amount
perhaps? Is there any net check to you at all?
In any event, Alan responded to your question. You have to have some
taxable - earned - income showing in Box 1 of your W-2 to even begin.
--
Paul A. Thomas, CPA
Watkinsville, Georgia
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Melinda Simon on August 9, 2008, 10:51 pm
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wrote:
>
> > I'm 54, working part-time, and my partner's income covers our current
> > needs. I'm putting 100% of my salary away in a 403b (it won't even hit
> > the $20,500 max). I also have some inherited annuities that I need to
> > cash in, which will give me about $15K taxable income. Since I'm not
> > taking anything home from my job, can I put any of the net from these
> > annuities into a Roth IRA? ie: does one have to have actual payroll-
> > earned income to put into a Roth?
>
> You're not putting "all" of your salary in a 403(b) if there is any taken
> out for Social Security or Medicare. You may be thinking of the net amount
> perhaps? Is there any net check to you at all?
>
> In any event, Alan responded to your question. You have to have some
> taxable - earned - income showing in Box 1 of your W-2 to even begin.
>
> --
> Paul A. Thomas, CPA
> Watkinsville, Georgia
Paul,
thanks. just so I understand: you're right, there will be SS, etc.
deducted from my gross, so it's 100% of my pre-tax net that will go
into my 403b. and you're saying that since that will not show any
remaining take-home, taxable income, I can't put any of the proceeds
of the annuity into either a standard IRA or a Roth. so the only way
to put it aside is in a traditional (investment, CD, bank, etc.)
account. do I have that all right?
thanks again.
Melinda
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Paul Thomas, CPA on August 11, 2008, 8:30 am
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> thanks. just so I understand: you're right, there will be SS, etc.
> deducted from my gross,
> so it's 100% of my pre-tax net that will go into my 403b.
Then not all your gross income goes into the 403(b). That
difference.....the amount of tax withheld basically.....is the amount of any
additional earned ~taxable~ income you have. So it's possible, but not any
greater than the amount of social security and/or medicare withheld from
your gross.
Your situation looks like this:
Gross wages
less Social Security
less Medicare
less 403(b)
------------------------
no net pay.
Is that about it?
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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