IRA for a W2 employee
Hello
Here is my situation, I am an IT contractor. I have a S Corp and a SEP IRA set up. I also have a 401K with my previous employer. This year I am working for another company on W-2 base. This company doesn’t provide any IRA for me. I have two questions here
1. What kind of IRA should I use for this year?
2. If I am going to close my S Corp, what do I have to do with my SEP IRA account? Do I need to close it? If the answer is yes, what kind of IRA I should set up to rollover my SEP IRA?
Thanks in advance
Permalink Submitted by Alan Spross on Mon, 2012-10-29 18:20
A SEP IRA is just a traditional IRA with special contribution rules. If you are not making SEP IRA contributions any longer you can just leave the SEP IRA alone, or you can roll it over to a traditional IRA account.
This year if you have at least 5k of W-2 earnings, you can make a traditional IRA contribution and deduct it. Box 13 of your W-2 should NOT have the retirement plan box checked. If it is checked, find out why. If the box is checked and your modified AGI exceeds the limit, you cannot deduct the contribution. If you cannot deduct the contribution, you are better off making a Roth contribution providing your income is not too high for that. Income limits depend on marital status.
If you are single, your modified AGI cannot exceed 58k for a full IRA deduction if you ARE covered per Box 13. If box 13 on your W-2 is blank, there is no income limit to deduct your IRA contribution.
Permalink Submitted by Jay Jay on Mon, 2012-10-29 21:09
Alan
Thanks for your quick response. It answers my questions.