Compensation for Traditional IRA contribution
Retired teacher, age 62, is receiving teacher’s pension from state(CT). Does this pension income qualify as ‘compensation’ for purposes of making a Traditional IRA contribution of $6,500? T/P has no w-2 or SE income. I thought pension income was not compensation for IRA contribution purposes, but his broker insists otherwise. Taxpayer made contribution in Jan. 2013 on advice of broker. I cannot find any exception for ‘teacher’s pension’.
Permalink Submitted by Alan - IRA critic on Tue, 2014-02-25 23:34
There is no such exception. Any chance the treacher is making a spousal IRA contribution from spouse’s earned income? Barring that, hopefully the Jan 2013 contribution was for 2013 and not 2012 because a timely correction for a 2012 excess contribution has passed and a 6% excise tax would be due for 2012 AND for 2013. The IRS does not detect excess contributions in any timely manner, but there is also no statute of limitations for an excess contribution.
Permalink Submitted by Earlene Bakerman on Wed, 2014-02-26 16:13
Thanks, this is a single taxpayer, so no spousal anything. The contribution was for 2013, so I am advising him to remove the excess contribution plus earnings on the excess, before we e-file his 2013 return. Thanks again.