IRA contribution made & no earned income

Submitted by Judy March on Thu, 2015-04-30 18:50

Client made 2014 IRA contribution (not sure yet what type) but was treated as non-resident for 2014 (filed 1040 NR) & had no taxable wages or compensation. What does client need to do with this contribution?



Submitted by Judy March on Thu, 2015-04-30 19:35

I’m pretty sure this is excess contribution & must be removed. 

Submitted by Alan - IRA critic on Thu, 2015-04-30 19:39

  • The excess contribution should be withdrawn including any earnings, providing the client either filed by 4/15 or filed an extension. The earnings will be taxable and subject to penalty IN the year the contribution was made.
  • If no return or extension was filed, it is too late to avoid the 6% excise tax and in that case the contribution could be used for 2015. This is all done on Form 5329, one for 2014 and one for 2015.

Submitted by Ben Meyer on Thu, 2015-04-30 23:33

Why did the client file 1040NR if no wages or compensation were received?  Was there a spouse with wages or compensation?  If so, the contribution may be allowable as a spousal IRA contribution.  Otherwise, it would be excess as noted by previous comments.

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