Advanced Underwriting Consultants

Question of the Day – August 19

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My clients are each 45, married filing jointly, and earned $172,000 of modified adjusted gross income (MAGI) in 2010, all of which was earned income.  What were the maximum Roth IRA contributions they could have made for that year?

Answer: For calendar year 2010, the ability to make a Roth IRA contribution began to be phased out beginning at $167,000 of MAGI, with complete phase-out hitting at $177,000.  Since these clients are right at the mid-point, each spouse would be entitled to make a Roth contribution of $2,500.

For others in the phase-out corridor, there is a handy online calculator to help figure the Roth and traditional deductible IRA contribution limits.

If the clients in the example contributed too much to their Roth IRAs in 2010, they could cure the excess contribution problem by withdrawing the excess, including earning or losses, by the due date for the 2010 tax return (including extensions).

If the taxpayers are entitled to make a Roth IRA contribution for 2011, they can absorb the excess contribution (and earnings) for 2010 up to the maximum limit for 2011.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.