I have a situation which has sort of caught me by surprise.
I worked for most of 2006 for a company at which I did not take part in their retirement program. I left that company in mid-September and started for a new company at which I _did_ sign up for their 401k and began contributing after my first or second paycheck.
It now appears that while in the past I was able to write off the full amount of my IRA contributions for the year (when I was at the previous company), I can now only write off a very small and almost inconsequential amount simply because I contributed to my at-work 401K for the last three months of 2006.
So whereas before I would be able to write of a nice, tax-impacting $4000, I can now only write off about $700 of a $4000 contribution. Obviously there is a tax advantage from my moneys that were taken out of my salary for my current at-work 401K, but I still think I would come out ahead tax-wise if I had just waited until after Dec. 31 to sign up for my new job's 401K.
Frustrating at the very least. Am I missing some wording somewhere that says I can pro-rate based on the % of the year I was with the old company? Is it actually true that if I had only been with my new company for two weeks and contributed to their 401K for that time I would be in the same situation? Just seems funky.
Obviously I should consult a tax professional, but thought I'd see what people in this forum had to say as well. TIA.
I worked for most of 2006 for a company at which I did not take part in their retirement program. I left that company in mid-September and started for a new company at which I _did_ sign up for their 401k and began contributing after my first or second paycheck.
It now appears that while in the past I was able to write off the full amount of my IRA contributions for the year (when I was at the previous company), I can now only write off a very small and almost inconsequential amount simply because I contributed to my at-work 401K for the last three months of 2006.
So whereas before I would be able to write of a nice, tax-impacting $4000, I can now only write off about $700 of a $4000 contribution. Obviously there is a tax advantage from my moneys that were taken out of my salary for my current at-work 401K, but I still think I would come out ahead tax-wise if I had just waited until after Dec. 31 to sign up for my new job's 401K.
Frustrating at the very least. Am I missing some wording somewhere that says I can pro-rate based on the % of the year I was with the old company? Is it actually true that if I had only been with my new company for two weeks and contributed to their 401K for that time I would be in the same situation? Just seems funky.
Obviously I should consult a tax professional, but thought I'd see what people in this forum had to say as well. TIA.
