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IRS Updates Info on Reporting Contributions to IRAs

The IRS has updated the information it provides concerning reporting contributions to IRAs. The information is contained in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).

What's New for 2022 

 

The following information in Publication 590-A is new for 2022 reporting: 

Qualified disaster tax relief. The SECURE 2.0 Act of 2022 made the special rules that provide for tax-favored withdrawals and repayments from certain qualified plans for taxpayers who suffered an economic loss as a result of a qualified disaster permanent. A qualified disaster is a major disaster that occurred on or after Jan. 26, 2021, and was declared by the President after Dec. 27, 2020, under Section 401 of the Robert T. Stafford Disaster Relief and Emergency Act. 

Certain corrective distributions not subject to 10% early distribution tax. Beginning on Dec. 29, 2022, the 10% additional tax on early distributions will not apply to a corrective IRA distribution, which consists of an excessive contribution (a contribution greater than the IRA contribution limit) and any earnings allocable to the excessive contribution, as long as the corrective distribution is made on or before the due date (including extensions) of the income tax return.

Statute of limitations rules changed for IRAs. Beginning on or after Dec. 29, 2022, the statute of limitations for excess contributions and excess accumulations (resulting from distributions less than the required minimum distribution) is changed. Under the new rules, the statute of limitations is changed to provide relief to taxpayers not aware of the requirement to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. Those who are required to file a tax return should attach Form 5329 to their return. Those not required to file a tax return should complete and file Form 5329 by itself.

Modified Adjusted Gross Income (AGI). There are a variety of changes to modified AGI for 2022: 
 

  • Modified AGI limit for traditional IRA contributions. For 2022, if one is covered by a retirement plan at work, the deduction for contributions to a traditional IRA is reduced (phased out) if one’s modified AGI is: (1) more than $109,000 but less than $129,000 for a married couple filing a joint return or a qualifying surviving spouse, (2) more than $68,000 but less than $78,000 for a single individual or head of household, or (3) less than $10,000 for a married individual filing a separate return.
  • Modified AGI limit for certain married individuals. If one is married and one’s spouse is covered by a retirement plan at work and one isn’t, and the couple lives together or files a joint return, the deduction is phased out if one’s modified AGI is more than $204,000 (up from $198,000 for 2021) but less than $214,000 (up from $208,000 for 2021). If the modified AGI is $214,000 or more, one cannot take a deduction for contributions to a traditional IRA.
  • Modified AGI limit for Roth IRA contributions. For 2022, the Roth IRA contribution limit is reduced (phased out) in the following situations: (1) filing status is married filing jointly or qualifying surviving spouse and the modified AGI is at least $204,000, (2) one’s filing status is single, head of household, or married filing separately and one didn’t live with a spouse at any time in 2022 and one’s modified AGI is at least $129,000, and (3) filing status is married filing separately, one lived with a spouse at any time during the year, and one’s modified AGI is more than zero. 

What's New for 2023 

 

The following information in Publication 590-A is new for 2023 reporting: 

IRA contribution limit increased. Beginning in 2023, the IRA contribution limit will increase to $6,500 ($7,500 for individuals age 50 or older) from $6,000 ($7,000 for individuals age 50 or older).

Increase in required minimum distribution (RMD) age. Individuals who reach age 72 after Dec. 31, 2022, may delay receiving their RMDs until April 1 of the year following that in which they turn age 73.

Modified Adjusted Gross Income (AGI). There are a variety of changes to modified AGI for 2023: 

  • Modified AGI limit for traditional IRA contributions increased. For 2023, if one is covered by a retirement plan at work, the deduction for contributions to a traditional IRA is reduced (phased out) if the modified AGI is: (1) more than $116,000 but less than $136,000 for a married couple filing a joint return or a qualifying surviving spouse, (2) more than $73,000 but less than $83,000 for a single individual or head of household, or (2) less than $10,000 for a married individual filing a separate return.
  • Modified AGI limit for certain married individuals increased. If one is married and one’s spouse is covered by a retirement plan at work and one is not, and the couple lives together or files a joint return, the deduction is phased out if the modified AGI is more than $218,000 (up from $204,000 for 2022) but less than $228,000 (up from $214,000 for 2022). If one’s modified AGI is $228,000 or more, one cannot take a deduction for contributions to a traditional IRA.
  • Modified AGI limit for Roth IRA contributions. For 2023, the Roth IRA contribution limit is reduced (phased out) in the following situations: (1) filing status is married filing jointly or qualifying surviving spouse and the modified AGI is at least $218,000, (2) one’s filing status is single, head of household, or married filing separately and one didn’t live with a spouse at any time in 2023 and one’s modified AGI is at least $138,000, and (3) filing status is married filing separately, one lived with a spouse at any time during the year, and one’s modified AGI is more than zero. 

Finding out More

The updated version of Publication 590-A is here: https://www.irs.gov/pub/irs-prior/p590a--2022.pdf

The IRS also recently updated Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). Read the story about that here: https://www.asppa.org/news/irs-issues-new-ira-reporting-info-rmd-reminder