Submitted by mdalh on 04-16-2021 12:36 PM
ProSeries needs to update their software to allow for Traditional and Roth IRA contributions based on fellowship income that is taxed as other income instead of earned income. Unless this fix is instituted in the software, the taxpayer is charged the 6% excise tax on the contribution and this is no longer correct.
Up until 2019, fellowship or training grant income (reported on a Form 1098-T or Form 1099-MISC or not reported at all) was not eligible to be contributed to an IRA. Certain legislation, the Graduate Student Savings Act (GSSA), which fixes this problem, has been proposed a few times since 2016, but never passed. However, at the end of the 2019 Congressional session, the text of the GSSA was passed and signed into law as part of an omnibus spending bill (H.R. 1865)Specifically, starting on January 1st, 2020, the definition of “taxable compensation” for the purpose of contributing to an individual retirement arrangement or IRA was updated to include taxable fellowship income not reported on a W-2.
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