Refresh Holders’ Knowledge on IRAs, IRS Suggests
The IRS has suggested that employers and organizations refresh IRA holders’ knowledge of, and attention to, what they can do and are required to do concerning their accounts. In Outreach Corner 2018-5, which it issued on May 8, the IRS offered sample language for that purpose.
The IRS suggests providing the following information.
Making IRA Contributions When Covered by an Employer’s Retirement Plan
If you qualify to make an IRA contribution, but you or your spouse are covered by an employer’s retirement plan, you:
- may still contribute to an IRA, but
Deducting Traditional IRA Contributions
- may not be able to deduct all or part of your traditional IRA contributions (Roth IRA contributions aren’t deductible).
Your ability to deduct your traditional IRA contributions depends upon your income and filing status as well as whether:
- you’re covered by an employer’s plan, or
- your spouse is covered by an employer’s plan.
You must file Form 8606, Nondeductible IRAs, with your income tax return for the year for which you make a nondeductible contribution. There’s a penalty for failing to file the form when required, and you may have to pay income taxes on the nondeductible contribution when you withdraw it from your IRA.Roth IRA Contributions
You or your spouse being covered by a plan at work doesn’t affect your ability to contribute to a Roth IRA. Also, unlike a traditional IRA, you can make Roth IRA contributions even if you are age 70½ or older. However, the amount you can contribute to a Roth IRA is limited by your filing status and income.Helpful Resources
The IRS suggests the following as resources on its website that can be helpful concerning IRAs:
- FAQs regarding IRAs — answers to common IRA questions on contributions, deductions, and rollovers.
- Publication 590-A, “Contributions to Individual Retirement Arrangements (IRAs) — information on contributing to traditional and Roth IRAs.”