Coaching Stipend Creates IRA Problem
I received a $1500 stipend for being an assistance coach at my local high school last fall. The district issued me a w-2 with the box 13 checked, saying that I was an active participant in their retirement plan. My CPA told me that both my husband and I could not make a deductible IRA contribution for 2015 because of the district’s W-2 reporting and our income level. I would like to know if I am truly ineligible for a deductible IRA? Firstly, the district is not my place of work. The IRS publications state “Your deduction may be limited if you (or your spouse, if you are married) are covered by a retirement plan at work and your income exceeds certain levels.” I am only treated as an employee because the IRS says that coaches are under district supervision and are therefore employees. The district says that their insurance company mandates that employees not in the state retirement program have to be signed up for the defined benefit plan. I am not entitled to any benefits from the defined benefit plan because my pay is low, the “employment” is temporary and seasonal so how can they check the box that says I have a retirement plan? Should I take the deduction anyway and argue with the IRS? Argue with the School District? Thanks.
Permalink Submitted by Alan - IRA critic on Thu, 2016-04-21 23:31
I don’t think you should unless you can get the district to rescind the W-2 or correct it to remove the retirement box. A W-2 with that box checked is an issue that you cannot argue with the IRS, and coverage by a DB plan even though you get no benefit from it has long been deemed by the IRS to count as plan participation. Have you both made the contributions for 2015 by 4/18? Do you each have non Roth IRA balances? I know you are looking for the deduction, but you might consider a back door Roth contribution since that is better than no contribution or a non deductible contribution.