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My wife and I will be filing separate tax returns this year. Since I made more than $10,000 modified AGI during 2020, this would normally mean I am ineligible to contribute to a Roth IRA. However, due to COVID and work circumstances, we lived apart for the whole year, she in a foreign country. Therefore my limit is the same as for filing as single:

https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020

single, head of household, or married filing separately and you did not live with your spouse at any time during the year

Then you can contribute... up to the limit

However, I don't know how to indicate on my return that we lived apart all year. I already contributed to my Roth in 2020 and I want to be sure that the IRS won't simply see my married & filing separately status and deem me ineligible, forcing me to retroactively prove my living situation for the year. How do I indicate my situation on my tax return, and how is it verified?

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    99.999% they simply accept whatever you claim, as they are too overloaded to audit you. if they decide to audit you, you can simply dxplain the situation and show papers for the second appartment/rental you had. – Aganju Apr 25 at 17:22
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    Interestingly, for the purpose of Traditional IRA deductions, 1040 instructions say to write "D" next to the IRA deduction line for MFS who lived apart with their spouse. However, I can't find an equivalent for Roth IRA contributions. I guess this is because Roth IRA contributions are not reported anywhere on the tax return, but if the IRS doesn't know you lived apart from your spouse, they may think you failed to report a penalty from excess contribution on form 5329. I don't know how you would prevent this, and I can't find anything on 5329 instructions about this. – user102008 Apr 25 at 18:28
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Because there is no form to file with a Roth IRA contribution, nor is there an entry on 1040, there is no way to indicate your living situation to the IRS in your filing.

Saving your paystubs and your spouse's paystubs for the year would be a good idea, in case the IRS contacts you.

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Just a suggestion that maybe alleviates any worry here: consider doing a backdoor Roth conversion. That is, contribute the money to a regular IRA account, but don't deduct that contribution from taxes -- this step has no income limits whatsoever. Then, once that money has settled in that account, ask your account provider to convert it to your Roth IRA account.

The only difference between a direct contribution to a Roth and this backdoor conversion is that converted money cannot be withdrawn for 5 years penalty-free unless you are 59 1/2 years old. A regular contributed dollar (not any of its earnings, but the original contributed dollar) can be withdrawn penalty-free at any time. If you are planning on just leaving that money in there anyway, then this difference is rather moot.

It is a tiny bit more paperwork, but it would eliminate any worries here about eligibility.

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  • I considered this, but I made the contribution to my Roth last year and it already has earnings on it. So, I would have to recharacterize that and then convert it, and I'm not sure how to deal with the earnings, I guess I'd need to withdraw them? – turtlesandtaxes Apr 27 at 4:40
  • @turtlesandtaxes last year's (or any other prior year's) contributions have nothing to do with this year's. You can do a backdoor Roth for this year's contribution and then convert it right into the existing account. Nothing needs to be done with the funds already in that account. You will need 2 separate accounts, one Trad and one Roth (which you already have); and the funds in the Trad are converted into that Roth. – R. Hamilton Apr 27 at 17:40
  • Sorry, by "last year" I mean 2020, the year for which I'm currently filing my return. I made the contribution about a year ago, so it already has earnings on it. – turtlesandtaxes Apr 28 at 1:37
  • @turtlesandtaxes It doesn't matter. I made plain old normal Roth contributions for years whilst my income was under the limits. The last few years, I've gotten lucky and my income is above the limits. So, I opened a new Trad IRA account, put money in that, didn't deduct the contribution from taxes, and then asked my brokerage to convert that money from Trad to Roth. And then I had a full year's contribution in the Roth along with all the previous years' and the earnings from those previous years. Previous years activity doesn't affect a current-year Roth conversion at all. – R. Hamilton Apr 28 at 14:12
  • I'm still not sure I understand. I'm currently filing my 2020 return and referring to the contribution for 2020, so in that sense I'm only concerned about the "current" tax year, not previous years. In any case, are you saying that I can recharacterize my Roth contribution + earnings to Trad, and then convert that same amount back into the Roth, without removing the earnings (which would count as a distribution)? – turtlesandtaxes Apr 28 at 17:14

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