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    jthomas119's Avatar
    jthomas119 Posts: 2, Reputation: 1
    New Member
     
    #1

    Jan 7, 2006, 11:23 PM
    1099-MISC income and IRA elgibility
    This year for the first time, I received all of my income from pension (30K), 1099-MISC (subcontractor) (60K) and capital gains from the sale of a house (100K+)

    Does this mean that I can not get either a traditional IRA or a ROTH IRA because I have no "earned income"?
    Is there any other tax free investment available to me?

    Thanks
    John
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,818, Reputation: 846
    Senior Tax Expert
     
    #2

    Jan 8, 2006, 08:14 AM
    John:

    Income earned as a subcontractor is considered earned income. Hence, you can fund your traditional or Roth IRA up to $4,000 ($4,500 if you are over age 50). You have until April 15, 2006, to fund your 2005 IRA

    In fact, you can also open up any of a number of pension plans for the subcontract business, to include a Self-Employment Plan (SEP) IRA, a SIMPLE plan, a profit sharing plan or even a 401K.

    You can contact any of the brokerage houses (Fidelity, Vanguard, Schwab, etc.) or any bank for details. Unfortunately, I believe the various pension plans must be established (though not necessarily funded) by December 31, 2005 for you to put money in them for 2005. I may be wrong on that (laws change, and there was talk of making the SEP IRA funding exactly like a regular IRA), so you need to contact one of the institutions noted above for complete information. At the very minimum, you can start and fund a pension for 2006.
    jthomas119's Avatar
    jthomas119 Posts: 2, Reputation: 1
    New Member
     
    #3

    Jan 8, 2006, 08:49 PM
    1099-MISC income and IRA elgibility
    Many thanks.

    I am reading about SEP-IRAs now. That sounds ideal for me since I can do it for about 13K instead of 4500 and it does appear that I can open it and fund it for 2005 up until 4/15.

    John
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,818, Reputation: 846
    Senior Tax Expert
     
    #4

    Jan 9, 2006, 06:48 AM
    John:

    Glad to hear that the SEP-IRA option is still open to you.

    However, you can also do the regular/Roth IRA in addition to the SEP-IRA for a total of $17,500.

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