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taxmap/pubs/p590-002.htm#en_us_publink1000230352

Who Can Set Up 
a Traditional IRA?(p7)


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previous topic occurrence Traditional IRA next topic occurrence

You can set up and make contributions to a traditional IRA if:
You can have a traditional IRA whether or not you are covered by any other retirement plan. However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. See How Much Can You Deduct, later.
taxmap/pubs/p590-002.htm#en_us_publink1000230354

Both spouses have compensation.(p7)


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If both you and your spouse have compensation and are under age 701/2, each of you can set up an IRA. You cannot both participate in the same IRA. If you file a joint return, only one of you needs to have compensation.
taxmap/pubs/p590-002.htm#en_us_publink1000230355

What Is Compensation?(p8)


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previous topic occurrence Compensation, Wage, Salary next topic occurrence

Generally, compensation is what you earn from working. For a summary of what compensation does and does not include, see Table 1-1. Compensation includes all of the items discussed next (even if you have more than one type).
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Wages, salaries, etc.(p8)


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Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2.
taxmap/pubs/p590-002.htm#en_us_publink1000230358

Commissions.(p8)


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An amount you receive that is a percentage of profits or sales price is compensation.
taxmap/pubs/p590-002.htm#en_us_publink1000230359

Self-employment income.(p8)


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If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of:
Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs.
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Self-employment loss.(p8)
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If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation.
taxmap/pubs/p590-002.htm#en_us_publink1000230361

Alimony and separate maintenance.(p8)


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For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance.
taxmap/pubs/p590-002.htm#en_us_publink1000230362

Military differential pay.(p8)


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For IRA purposes, compensation includes military differential pay you receive. Military differential payments are those payments made by some employers to employees who have been called to active duty in the uniformed services for a period of more than 30 days. Beginning in 2009, these payments will be reported in box 1 (Wages, tips, other compensation) of Form W-2.
taxmap/pubs/p590-002.htm#en_us_publink1000230363

Nontaxable combat pay.(p8)


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If you were a member of the U.S. Armed Forces, compensation includes any nontaxable combat pay you received. This amount should be reported in box 12 of your 2009 Form W-2 with code Q.
If you received nontaxable combat pay in 2004 or 2005, and the treatment of the combat pay as compensation means that you could contribute more for those years than you already have, you could have made additional contributions to an IRA for 2004 or 2005 by May 28, 2009. The contributions are treated as having been made on the last day of the year you designate. If you have already filed your return for a year for which you make a contribution, you must file Form 1040X, Amended U.S. Individual Income Tax Return, by the latest of:
taxmap/pubs/p590-002.htm#en_us_publink1000230364

Table 1-1. Compensation for Purposes
of an IRA

Includes ... Does not include ...
  earnings and profits from
 property.
wages, salaries, etc. 
  interest and
 dividend income.
commissions. 
  pension or annuity
 income.
self-employment income. 
  deferred compensation.
alimony and separate maintenance. 
  income from certain
 partnerships.
military differential pay. 
  any amounts you exclude
 from income.
nontaxable combat pay. 
  
taxmap/pubs/p590-002.htm#en_us_publink1000230366

What Is Not Compensation?(p8)


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Not Compensation

Compensation does not include any of the following items.