Retired Annual Sick Leave contributed to Roth
A gentleman who worked for the state of AZ retired with a large amount of sick leave. The state of AZ is paying his accumulated sick leave over 3 years. He received a W-2 for the payment he received in his 2nd year of retirement. He is wondering if he can contribute the amount on the W-2 to a Roth IRA.
Permalink Submitted by Alan Spross on Mon, 2010-02-15 19:24
Yes. W-2 income is a safe harbor for determining taxable compensation. The amount of such compensation is the Box 1 amount less any amount in Box 11.
Of course, his modified AGI must also not be too high for a Roth contribution.
Permalink Submitted by steve harper on Mon, 2010-02-15 21:08
Thanks alan-oniras! Always enjoy reading your posts. What is the easiest way to determine modified AGI? I am familiar with AGI being listed on the 1040 but not sure if I just need to add muni bond interest to AGI or what exactly needs to be done to determine MAGI???
Permalink Submitted by Alan Spross on Tue, 2010-02-16 00:24
The definition in on p 58 of Pub 590.
Start with Fprm 1040 AGI. Muni bond income does not get added but 8 other items do. Roth conversion income is subtracted out.