Roth IRA with NOL carried forward from previous year.
I have a NOL from a sub-s corp carryover from a previous year that will reduce AGI to below $0. Do I qualify for a Roth IRA contribution for the year?
I have a NOL from a sub-s corp carryover from a previous year that will reduce AGI to below $0. Do I qualify for a Roth IRA contribution for the year?
Permalink Submitted by mk foss on Tue, 2010-01-05 01:58
You need to have earned income in order to make a Roth contribution. The S corp income or loss is not earned income, so the NOL will not prevent you from making a contribution. You would need to have a salary from the S corp or earned income from another source.
Permalink Submitted by Alan Spross on Tue, 2010-01-05 02:01
Regular Roth IRA contributions require earned income. There is a maximum modified AGI over which you cannot make a contribution, but negative modified AGI does not affect this as long as you have the earned income (eg salary, commissions, self employment income, alimony and non taxable combat pay) from which to make the contribution. Spousal earned income can also be used to make a spousal Roth contribution for the non working spouse.
You may also consider a Roth conversion if you have accounts to convert and if you will have negative AGI. You can select an amount to absorb the negative amount plus your personal and dependency exemptions and standard or itemized deductions before the conversion will incur taxes. Some people convert enough to fill up their 10% or 15% brackets as well. The good thing about conversions is if there is unexpected income or errors in planning, they can be reversed (recharacterized) up to the extended due date in the following year.