Traditional IRA and FAFSA Application

[mmkad4]

Hello everyone,

I am hoping that someone here is familiar with the FAFSA application and how Traditional IRA contributions are treated.

So, here's my problem. This is my first year contributing to a Traditional IRA. In the past, I've contributed pre-tax money to my 401k up to (and sometimes above) my company's match and any extra $$ into a Roth. This year, for several different reasons, the Traditional IRA made more sense.

When I filled out my FAFSA, since 401k contributions were not included in Box 1 of my W-2, I didn't include it as income on the FAFSA (although it is counted as untaxed income on the FAFSA). The problem with the Traditional IRA is that the money I contributed to the IRA is money that is included in box 1 of my W-2, so I have to show it as income on the FAFSA, but I also have to include it as untaxed income. I am not sure how to handle this. I'm afraid that I am counting income twice. If pre-tax 401k income is not shown in Box 1 of my W-2, should I manually deduct the amount that I contributed to the Traditional IRA from whatever income is showing in Box 1 as well and just include it as untaxed income on the FAFSA?

I hope this makes sense. Any thoughts?

[happytraveler]

Jan 22, 2011 18:13:11 GMT -5 mmkad4 said:

The problem with the Traditional IRA is that the money I contributed to the IRA is money that is included in box 1 of my W-2, so I have to show it as income on the FAFSA, but I also have to include it as untaxed income. I am not sure how to handle this. I'm afraid that I am counting income twice.

I found this totally confusing---why would you show income as both pre and post tax simultaneously?

[endofera]

There are 2 separate lines for your retirement contributions. One says "Parents payments to tax deferred pensions and savings" which is where your 401K contribution goes and the next line is "Parent's deductible IRA/Keogh payments" which is where the traditional IRA contribution goes.

[happytraveler]

Jan 23, 2011 10:33:33 GMT -5 endofera said:

the next line is "Parent's deductible IRA/Keogh payments" which is where the traditional IRA contribution goes.

iI am curious---what if your traditonal IRA contribution is not deductible? I believe you can still make after tax contributions to your traditional IRA.

[endofera]

If it is not deductible, then it doesn't show up on your tax return as a deduction and therefore it doesn't go on the FAFSA. Roth IRA contributions do not go on the form either.

Corrected my typing.