Taxes, What’s New for 2011—With your IRA, Know before you Go!
Modified AGI limit for traditional IRA contributions increased. For 2011, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:
- More than $90,000 but less than $110,000 for a married couple filing a joint return or a qualifying widow(er),
- More than $56,000 but less than $66,000 for a single individual or head of household, or
- Less than $10,000 for a married individual filing a separate return.
If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $169,000 but less than $179,000. If your modified AGI is $179,000 or more, you cannot take a deduction for contributions to a traditional IRA.
Modified AGI limit for Roth IRA contributions increased. For 2011, your Roth IRA contribution limit is reduced (phased out) in the following situations.
- Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $169,000. You cannot make a Roth IRA contribution if your modified AGI is $179,000 or more.
- Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2011 and your modified AGI is at least $107,000. You cannot make a Roth IRA contribution if your modified AGI is $122,000 or more.
- Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.
Simplified employee pension (SEP). SEP IRAs are not covered in this publication. They are covered in Publication 560, Retirement Plans for Small Business.
Deemed IRAs. A qualified employer plan (retirement plan) can maintain a separate account or annuity under the plan (a deemed IRA) to receive voluntary employee contributions. If the separate account or annuity otherwise meets the requirements of an IRA, it will be subject only to IRA rules. An employee’s account can be treated as a traditional IRA or a Roth IRA.For this purpose, a “qualified employer plan” includes:
- A qualified pension, profit-sharing, or stock bonus plan (section 401(a) plan),
- A qualified employee annuity plan (section 403(a) plan),
- A tax-sheltered annuity plan (section 403(b) plan), and
- A deferred compensation plan (section 457 plan) maintained by a state, a political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state.
Contributions to both traditional and Roth IRAs. For information on your combined contribution limit if you contribute to both traditional and Roth IRAs, see Roth IRAs and traditional IRAs under How Much Can Be Contributed? in chapter 2.
Statement of required minimum distribution (RMD). If an RMD is required from your IRA, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the RMD to you, or offer to calculate it for you. The report or offer must include the date by which the amount must be distributed. The report is due January 31 of the year in which the minimum distribution is required. It can be provided with the year-end fair market value statement that you normally get each year. No report is required for section 403(b) contracts (generally tax-sheltered annuities) or for IRAs of owners who have died.
IRA interest. Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. Tax on your traditional IRA is generally deferred until you take a distribution. Do not report this interest on your return as tax-exempt interest. For more information on tax exempt interest, see the instructions for your tax return.
Disaster-related tax relief. Special rules apply to the use of retirement funds (including IRAs) by qualified individuals who suffered an economic loss as a result of:
- The storms that began on May 4, 2007, in the Kansas disaster area, or
- The severe storms in the Midwestern disaster areas in 2008.