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Level 4
March 11, 2021
Question

IRA contribution deduction when employee changes jobs

  • March 11, 2021
  • 1 reply
  • 9 views

My client was employed for 8 months by a company that had no retirement plan. They changed jobs in months 9 - 12 to an employer with a retirement plan. Are the IRA contributions made during the first 8 months deductible, and if so, do I need to override the retirement plan check mark on the IRA worksheet to make this happen?

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1 reply

rbynaker
Level 13
March 11, 2021

If you are covered for one day during the tax year, you are considered covered for the entire year.  So no prorating or special treatment for the early part of the year.  "Covered" puts you into the income limits for deductibility.  Non-deductible contributions are still allowed but instead of resulting in a tax deduction they create basis and are reported on Form 8606.