IRA Traditional Contribution

[PeterK]

Client was terminated in 2019 and received severance payment in January 2020. Clients W2 is marked as retirement plan participant. This prevents deductible traditional IRA contribution. Since client has no 2020 participation in the 401k plan due to termination can he make a deductible contribution to IRA ??

In order to do this one must uncheck retirement box on W2 to allow deduction ??

[sjrcpa]

Not if his income is too high.

He may have received an employer contribution or allocation of forfeitures making the retirement plan box correct.

Otherwise he would have to get the employer to correct the W-2.

EDIT: He may also have been eligible to have some of that severance pay contributed to the 401(k).

[qbteachmt]

This seems like you started the Same Topic you had already asked, here:

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/traditional-ira-contrib...

I will mark the first one to be deleted. There is no need to keep starting new topics. This is not Live Chat. The same people that saw the first time you asked, also see the second time you asked.

[qbteachmt · Accepted solution]

From: https://www.irs.gov/retirement-plans/common-errors-on-form-w2-codes-for-retirement-plans

"Form W-2, Box 13
The “Retirement plan” indicator in Box 13 shows whether an employee is an active participant in your company’s plan. If this box is checked, it lets the recipient know that depending on their filing status and modified adjusted gross income, they may not be entitled to a full deduction for their traditional IRA contributions. You should check the retirement plan box if an employee was an “active participant” for any part of the year in:

• a qualified pension, profit-sharing, or stock-bonus plan under Internal Revenue Code Section 401(a) (including a 401(k) plan).
• an annuity plan under IRC Section 403(a).
• an annuity contract or custodial account under IRC Section 403(b).
• a simplified employee pension (SEP) under IRC Section 408(k).
• a SIMPLE retirement account under IRC Section 408(p).
• a trust described in IRC Section 501(c)(18).
• a plan for federal, state, or local government employees or by an agency or instrumentality thereof (other than a 457(b) plan).

Active participant
Generally, an employee is an active participant if covered by a:

• defined contribution plan (for example, a 401(k) plan) for any tax year and is credited with any contributions or forfeitures, or
• defined benefit plan for any tax year that the employee is eligible to participate.

Don’t check the retirement plan box if your company only has non-qualified or 457(b) plans."

Also, read: https://www.irs.gov/retirement-plans/are-you-covered-by-an-employers-retirement-plan

That way, you know what to look for that is the defining issue.