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Contributor

10/10/11 10:37pm PDT
Viewed by asker 10/12/11 9:48pm PDT

Roth IRA limits for 2010?

ProSeries : 2010

I have a client return with just over $1M in AGI, which includes $386K in SE income and $23,599 in SE tax. Form 5329 is calculating excess Roth IRA contributions and showing $5,249 in tax. Apparently because 5329 is saying he doesn't have any earned income (no W-2 wages, but does have SE income and SE tax) Supporting worksheets don't recognize any of the SE income as Earned Income, and won't let me enter it anywhere.

Last I checked SE income is Earned Income for Roth IRA purposes, and there is not supposed to be an income limit in 2010 and 2011 for Roth IRA contributions from a traditional IRA (client withdrew $88K from a traditional IRA and setup a Roth IRA with the proceeds). Does ProSeries have the law wrong, or am I not finding the correct place to enter the SE income as Earned Income?

I do not think he has any excess contributions and the income limit doesn't apply this year. What have I got wrong?

I appreciate any enlightenment you can give me. Thanks

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6 Replies

Accountant Man

Accountant Community AllStar

10/11/11 6:35am PDT

His AGI is too high by far for a ROTH contribution, but not a ROTH conversion. Which is it? The IRA conversion will be on the 1099-R, also page 2 box B4, and then the 8606.

Where is the SE income, on Sch C or Sch E? Sch E should show as SE, assuming you marked the 1065 box 1 materially participated.

If you use Pro Series Basic I might not be able to help you. If you use Turbo Tax I might refuse to help you. All others, watch out! ;-)

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LJHCPA

Contributor

10/11/11 10:20pm PDT

Thanks for your response. I did eventually figure it out. I was initially confused by the subtle distinction between a contribution and a conversion. Contributions ARE subject to the income limits, conversions are NOT subject to the income limits in 2010 and 2011.

I still think ProSeries is confusing in this area, because I never did find a place to enter the amount converted--perhaps there is none in the program--but I was able to eliminate the 2010 additional tax, because the amount put into the Roth was not a contribution, but a conversion. The only tax comes in on the difference between the amount of the traditional IRA distribution and the basis (non-deductible contributions), and that is spread out over 2011 and 2012.

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Accountant Man

Accountant Community AllStar

10/12/11 8:38am PDT

The solution

"The IRA conversion will be on the 1099-R, also page 2 box B4, and then the 8606. "

You must have missed this part of my previous answer. This is where it goes. The 8606 has a box to elect to tax it all in 2010, but unless you check that box, it gets spread over 2011 and 2012.

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LJHCPA

Contributor

10/12/11 9:48pm PDT

Yes, I noted that, thanks. The client wants to defer it to 2011 and 2012.

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ArchieLeach

Accountant Community AllStar

10/13/11 6:53am PDT

>>>I still think ProSeries is confusing in this area,<<<

Larry, IMO, it's not ProSeries that causes the confusion, it's the [removed] law itself. How they can take something as conceptually simple and elegant as IRAs, and turn them into something that requires an MBA in Taxation with a specialization in Retirement to understand them....it just [removed]s me the [removed] off!

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Accountant Man

Accountant Community AllStar

10/13/11 8:27am PDT