Roth IRA contributions if MFS

[Quattro Pete]

http://www.irs.gov/publications/p590/ch02.html#en_US_publink1000230977

What is the logic of not being allowed to contribute anything to your Roth IRA if your annual income was above $10K and your filing status is "married filing separately"?

At the same time, if your filing status is "married filing jointly", then you can contribute to Roth IRA as long as your annual income was up to $176K?

 

[unDummy]

Government doesn't need logic.

And, you don't want my opinion on married couples keeping finances separate either.

 

[CivicFan]

$10k limit sounds bizarre.

 

[stockrex]

call them, the agents on the phone are great to work with.

 

[Quattro Pete]

Well, in any case, it looks like I will have to withdraw my $5,000 Roth IRA contribution that I made last year. Does anyone know how to do this to avoid any penalties? Can I convert it to traditional IRA?

I'm trying to get a hold of Fidelity to see if they can suggest something...

 

[bradepb]

Just curious what is the advantage to married filing seperate? The standard deduction is so much more jointly, or is it for people who are literally seperated?

 

[Drew99GT]

http://www.moneychimp.com/articles/rothira/contribution_limits.htm

 

[Quattro Pete]

Thanks.

Looks like I'm going to have to recharacterize my last year's Roth IRA contributions (and earnings) into a traditional IRA to avoid having to pay a 10% penalty on earnings as well as avoid having those earnings being taxed this year.

 

[BeanCounter]

IRS Pub 590

"Withdrawals of contributions by due date.
If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in which you made the contribution, the contributions are treated as if you never made them. If you have an extension of time to file your return, you can withdraw the contributions and earnings by the extended due date. The withdrawal of contributions is tax free, but you must include the earnings on the contributions in income for the year in which you made the contributions."

 

[javacontour]

Originally Posted By: bradepb
Just curious what is the advantage to married filing seperate? The standard deduction is so much more jointly, or is it for people who are literally seperated?


Not necessarily advantage, but maybe you are in the middle of a divorce and your estranged spouse doesn't want to file with you.

Or you suspect your spouse of cheating on her taxes and don't want to be on her return.

It may be more defensive than it is avoiding taxes.

 

[javacontour]

The other reason is if your spouse has a judgment against them where the IRS can withhold the refund, you may not want to file jointly.

You'll probably pay more in taxes, but you'll get your refund and she'll still owe the judgment.