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Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2429
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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I was unemployed the for the first 3 quarters of this year.

This answer was rated:

I was unemployed the for the first 3 quarters of this year. On Oct 1, I got a job.

Fortunately, I have the financial flexibility to contribute the entire $17,500 limit.

My total wages from Oct. 1 - Dec. 31 will be $26,500.

Does this mean that my taxable income for 2013 will be $26,500 - $17,500 = $9,000?

Am I eligible for all associated government benefits of a $9,000 annual salary individual?

Anne :

Hi

Anne :

Thank you for using justanswer

Customer:

Hello

Customer:

Just wondering if you already answered my question, or if this chat will address it?

Anne :

If your employer allows you to contribute the max to your 401K ($17,500) from Oct -Dec then there should be no problem there

Anne :

However, I am not sure that your calculation is entirely correct

Anne :

As you know, unemployment is taxable

Customer:

I understand, I just put numbers out there for simplicity.

Anne :

You didn't mention if you actually received any unemployment during the year, but I wanted to be sure that we were on the same page there

Anne :

ok......that's makes sense then

Anne :

I just wanted to be sure that we covered that subject

Customer:

Also, if I contribute more than $5,500 to my 401K, then I'm ineligible to contribute to an IRA also. Is that right? Or is it dependent solely on income? The IRS website states it is based on income levels, but I'm not sure.

Anne :

please give me just a second while I find that for you

Anne :

Starting in 2013, eligible people under age 50 can contribute $17,500 to 401k plans and $5,500 to IRA plans. \

Anne :

The above information came from this web site:

Anne :

http://budgeting.about.com/od/Taxes/a/Ira-And-401k-Contribution-Limits-Increasing.htm

Customer:

For 2012 (and I'm assuming 2013 also), it appears that I can do this since my income is below the threshhold in this table from the IRS website. Think it confirms what you stated above:

Customer: 2012 IRA Contribution and Deduction Limits - Effect of Modified AGI on Deductible Contributions If You ARE Covered by a Retirement Plan at Work

If you are covered by a retirement plan at work, use this table to determine if your modified AGIaffects the amount of your deduction.




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If Your Filing Status Is...


And Your Modified AGI Is...Then You Can Take...
single or
head of household

$58,000 or less



a full deduction up to the amount of your contribution limit.



more than $58,000 but less than $68,000



a partial deduction.



$68,000 or more



no deduction.


married filing jointly orqualifying widow(er)

$92,000 or less



a full deduction up to the amount of your contribution limit.



more than $92,000 but less than $112,000



a partial deduction.



$112,000 or more



no deduction.


married filing separately

less than $10,000



a partial deduction .



$10,000 or more



no deduction.


If you file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the "single" filing status.

Page Last Reviewed or Updated: 05-Mar-201
Customer:

My AGI will be less than $58,000

Anne :

yes, you are absolutely correct

Customer:

Thanks. Just wanted to confirm.

Anne :

Thank you for allowing me to help you today

Customer:

Also, are IRA / 401K contributions exempt from state taxes also. That's the last question.

Anne :

that varies from state to state.......and it appears that you live in CA, so let me check that out for you

Anne :

I'm sorry to take some extra time here

Anne :

but I live in MI, so I need to look up CA

Anne :

Do you mind waiting?

Anne :

No

Anne :

CA recoginizes deferred comp

Anne :

and does not require any type of adjustment for your deferred comp plan

Customer:

Anne, thanks for the answer.

Customer:

We can end this chat. You've been helpful.

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