My employer making my ROTH IRA contribution for me.

Submitted by Brenda Murphy on Tue, 2017-12-19 16:27

My employer wants to give me money (not from my paycheck) to contribute to my ROTH IRA. Can they do that?

Permalink Submitted by David Mertz on Tue, 2017-12-19 17:01

They can do that, but the employer must include it as part of your wages reported in boxes 1, 3 and 5 of your W-2. They can either treat it as part of your regular pay for a payroll period and withhold taxes at your regular withholding rate or they can pay it to you as supplemental wages and withhold taxes at a fixed 25% rate. Either way, it’s income to you subject to Social Security and Medicare taxes.
Whatever amount is deposited into the Roth IRA is treated as your own personal Roth IRA contribution, no different than a Roth IRA contribution made with any other money. You are eligible for the Roth IRA contribution only if your modified AGI for the year of the contribution does not exceed the threshold for being eligible to make the contribution.