My wife started a new job very late in 2015. She signed up for the retirement plan, a 403b plan and contributed approximately $200. Now doing our taxes, (married, filing jointly) we find we cannot contribute to our IRA's since she was covered by a retirement plan in 2015 and we are over income limits. So for $200 in a 403b we are now looking at close to $4000 extra in taxes since we can't contribute to IRA's. Is there any way to rescind a contribution after the fact to a 403b or 401k type plan? Having money held from one paycheck hardly counts as being covered by a retirement plan in my book!

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    Are you under the Roth limit? If not, you could still contribute to a nondeductible IRA and convert it to Roth (backdoor conversion) perhaps. Not optimal but better than nothing? And if you or your wife had self employed income, don't forget about SEP IRA which doesn't have the income limit. – Joe Mar 31 '16 at 11:11

Having money held from one paycheck hardly counts as being covered by a retirement plan in my book!

It's not your book that counts, it's the Congress' book called the Internal Revenue Code.

No, you cannot rescind a contribution after the fact. Maybe during the year you can do something with employer balancing it out, but not after the year is closed. (That, by the way, is different for IRAs where you can actually do re-characterization until the tax day of the next year)

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    Consulted with a CPA and got the same answer. A very expensive mistake and an example of gotchas and non-linearities in the tax code. We avoided income tax on $200 and will now pay thousands (not to mention no retirement savings for 2015). For anybody who stumbles across this, if you and your spouse are not currently covered by a retirement plan, think long and hard before you check the box to be covered late in a tax year. Being covered by an employer plan is not always an unalloyed benefit. – LawsonM Apr 1 '16 at 17:59

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