IRA contribution

A client was laid off from her company and is going to be doing some consulting. Her husband is covered under his companies 401k. Her question was can she do a deductible IRA or a SEP?



She could set up a SEP IRA for the consulting business assuming she is an independent contractor. With respect to TIRA deduction, since she apparently was covered under a retirement plan at some point earlier this year, the deduction would be phased out starting at 96k modified joint AGI and be completely phased out at 116k. Roth IRA contribution phaseout range is 181k to 191k joint MAGI.

I agree with Alan that a SEP IRA is often the best solution. If you’re under the phase out range, the traditional IRA can often provide a larger deduction when a business is just starting out. You can look at both options, an IRA contribution for 2014 is due by April 15, 2015 but if the return is extended the due date of the SEP contribution is also extended until October 15, 2015. 

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