Frequently Asked Tax Questions And Answers
Keyword: Nondeductible Contributions (IRA)
5.1 Pensions/Annuities/Retirement Plans (i.e., 401(k), etc.): General/Taxability Issues including Distributions, Early Withdrawals, 10% Additional Tax, Defaulted Loans
The answer to this question depends on your type of retirement plan. Generally, if your employer's plan has a separate account for each employee, it is a defined contribution plan. If any amount was contributed or allocated by you or your employer to your account, you are considered covered. It does not matter if you have worked long enough to be vested.
In the other type of plan, a defined benefit plan, the employer must make enough contributions (together with earnings) to provide the retirement benefit promised in the retirement plan. In this type of plan, if you meet the minimum age and years of service requirements to participate in your employer's plan, you are considered covered. It does not matter if you are vested.
The Form W-2 (PDF) you receive from your employer has a box used to indicate whether you were covered for the year. The "Pension Plan" box should have a mark in it if you were covered.
There are no forms to report a Roth contribution. The financial institution, which is the trustee of your Roth IRA, will send you information on the amount in your Roth IRA. They will also send the information to the Internal Revenue Service. Use Form 8606 (PDF), Nondeductible IRAs, if you made a nondeductible contribution to a traditional IRA; converted from a traditional IRA, a SEP, or Simple IRA to a Roth IRA, received a distribution from a traditional IRA, a SEP, or a Simple IRA and made nondeductible contributions to a traditional IRA, or received a distribution from a Roth or traditional IRA.
References:
- Publication 590, Individual Retirement Arrangements (IRAs)
- Form 8606 (PDF), Nondeductible IRAs
- Tax Topic 428, Roth IRA Distributions
Yes, you can make a contribution to a SEP-IRA and a Roth IRA. See Chapter 2 of Publication 590, Individual Retirement Arrangements (IRAs), for the requirements to contribute to a SEP and a Roth IRA. However, your SEP IRA contribution and Roth IRA contribution can not be made to the same IRA.
References:
- Publication 590, Individual Retirement Arrangements (IRAs)
- Tax Topic 451, Individual Retirement Arrangements (IRAs)