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04-15-2008, 11:47 AM
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#1 |
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Registered User
Join Date: Jan 2006
Posts: 25
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Roth IRA and K1s
Hi, I screwed up. I set up a Roth IRA after extensive research and now it seems like I'm not allowed to have a Roth IRA. WHAT NOW?
I set up a Roth IRA last year with Vanguard and thought that I qualified to contribute however when filling out my taxes I was alerted that I had made an excess contribution because my earned income is zero. All of my income comes from a share of my business' income which is recorded on a K1. Am I not allowed to contribute to a Roth IRA? As a temporary measure I've switched my contributions from 2007 to 2008 to buy myself some more time to figure out what to do. I really want to set up a retirement plan but don't know what to do now. |
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04-15-2008, 12:06 PM
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#2 |
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Registered User
Join Date: Mar 2004
Location: New York
Posts: 1,351
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It's going to be kind of hard to set up a retirement fund if your earned income is always zero. Maybe you can have your parents issue a 1099 to you as a contractor for your services. Or, they "put you on the books" and issue a W2.
If the income is passive (you don't materially participate), you may be out of luck as this sort of income is considered to be unearned by the IRS. |
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04-15-2008, 01:06 PM
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#3 |
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Registered User
Join Date: Jan 2006
Posts: 25
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My parents? Uh... yea, they have no involvement in any of this. I do designate my full material participation in the business.
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04-15-2008, 01:30 PM
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#4 |
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Registered User
Join Date: Mar 2004
Location: New York
Posts: 1,351
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Oops, don't where I got that exactly. Anyway, that doesn't change the fact that you need to show an income to contribute to a retirement plan. You need to declare a salary on your K1.
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04-15-2008, 01:35 PM
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#5 |
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Registered User
Join Date: Jan 2006
Posts: 25
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currently on the K1 I put my earnings in the first box.... Ordinary Business Income. I don't understand why thats not showing an income?
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04-15-2008, 06:11 PM
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#6 |
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Registered User
Join Date: Oct 2001
Posts: 1,586
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Pricespector had it right in their first post, you need earned income.
Earned income is shown on a W-2, and Schedules C or F. You should receive a W-2 from the business, then you can have an IRA. |
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04-15-2008, 06:38 PM
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#7 |
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Registered User
Join Date: Jan 2006
Posts: 25
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that makes sense, but seems crazy that i can't have a schedule k1 and have a retirement account.
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