Calculation of Modified AGI in year of Roth conversion with Traditional IRA contribution

Submitted by David Castelli on Wed, 2020-12-23 12:47

ran a scenario for client, MFJ , both participate in employer pension, AGI before Roth Conversion was 110,000,

Roth conversion was $50,000………..taxpayers still making 14,000 of traditional IRA contribution

My software is allowing the 14,000 traditional IRA deduction, even thought the AGI is well over the 124,000 limit

I thought the modified AGI calculation only applied to Roth IRA contribution, NOT traditional. I am thinking the 14,000 IRA contribution should be non-deductible but my software is allowing the traditional IRA deduction

Any help would be appreciated
Enjoy all holidays!



Submitted by David Mertz on Wed, 2020-12-23 13:35

  • You are correct.  It seems that the software is not recognizing that these individuals are covered by a workplace retirement plan.  It’s doubtful that this would be a bug in professional tax software, so recheck your inputs, in particular that you have marked box 13 Retirement plan on the Form W-2 for each individual to indicate that the employer provides a pension plan.
  • Note that “participation” refers to making additions to the plan, not to distributions from a retirement plan.
  • You can test to see if the software is mistakenly reducing MAGI for the purpose of the TIRA deduction by the amount of the Roth conversion by entering $50,000 of interest income instead of $50,000 of taxable Roth conversion.

Submitted by David Castelli on Fri, 2020-12-25 17:16

will check other inputs but i did specifically check both have a pension plan in the IRA input area in software. Will do same on W2 to see if that triggers itMerry Christmas and enjoy all the holiday!

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