Simple IRA

[Christian]

A client has a Simple IRA account to which he has contributed each year. Upon turning

70 1/2 this year he received his first MRD. As he plans to continue in the side business he operates he questioned his fiduciary about continuing to contribute each year as long as he operated his business. They advised that yes he could contribute each year even though he had now begun receiving a MRD each year as long as he was still in business. I am going to check this but would like to know if any of you have encountered this situation and if so what your determination was.

[Guest Taxed]

I have several clients enrolled in Simple IRA and one particular fellow is 72 and still making contributions.

Here is the rule from pub 560.

Can I contribute to a SIMPLE IRA of a participant over age 70 ½?

Yes. Employees who are age 70 ½ or over may make salary deferral contributions to their SIMPLE IRAs. Employers must continue to make matching or nonelective contributions to employees’ SIMPLE IRAs even after an employee reaches age 70 ½. However, an employee who is age 70 ½ must also begin to take required minimum distributions from the account.

Employees may not be excluded from participating in a SIMPLE IRA plan based solely on their age.

[jklcpa]

Yes, I had a client ask the same question this year. As long as he is still working with earnings, he can continue to contribute to a SIMPLE IRA.

There is an exclusion from the RMD rule for those that are still working IF they own no more than 5% of the company. Those working with more than 5% ownership in the company must take the RMD.

[Jack from Ohio]

Yes, I had a client ask the same question this year. As long as he is still working with earnings, he can continue to contribute to a SIMPLE IRA.

There is an exclusion from the RMD rule for those that are still working IF they own no more than 5% of the company. Those working with more than 5% ownership in the company must take the RMD.

This only applies to a company provided 401K for the company he works for.

IRA must distribute RMD.

As long as the taxpayer has earned income equal to or above the amount he wishes to contribute, he can do so.

[jklcpa]

Jack is correct on the part about the RMD. IRA-based plans would require the distribution. Thanks for the correction.

[Guest Taxed]

Why did Congress make this change for Simple IRAs. It is suppose to be the "poor man's 401(k)". These slight differences in law drive you crazy.

[kcjenkins]

Because tax law is written by committees, Taxed. A horse built by a committee is a camel, you know.

[Guest Taxed]

A little bit of common sense and logic would have helped? I guess the committees work like mindless robots?

[Gail in Virginia]

A little bit of common sense and logic would have helped? I guess the committees work like mindless robots?

If you want common sense and logic, you are in the wrong business. Tax law has never in my memory been based on common sense and logic.

[Guest Taxed]

>>> Tax law has never in my memory been based on common sense and logic.

If it were we all would be doing something else to make a living?

[Christian]

Thanks for all of your responses.