My certificate of deposit (CD) has just matured and I plan to contribute $10,000 of it to my current Roth IRA account. The person doing my taxes can't tell me why I can't make such a large contribution except for my low income - I am a disabled veteran on

Your regular Roth IRA contribution can't exceed $4,000 annually. If you are at least age 50 by Dec 31, 2005, you can contribute an additional $500, bringing your annual contribution limit to $4,500. However, if your income for the year is less than $4,000, your contribution can't be higher than your income. For instance, if your income for the year is $3,000, you may contribute no more than $3,000 for the year.

These contribution limits are established by federal law. If you contribute more than the limit, the excess amounts may be subject to penalties and excise taxes, unless you remove the excess amount by certain deadlines.

Here's another option to consider: if the $10,000 is from a Traditional IRA CD, then you can put the entire amount in your Roth IRA as a Roth IRA conversion, provided your modified adjusted gross income (MAGI) is not more than $100,000 and your tax filing status is not married filing separately. The $100,000 limit applies to you and your spouse if you are married, which means your joint MAGI cannot exceed $100,000.

You may find IRS publication 590 helpful.

(For more on Roth IRA conversion, see Avoiding IRS Penalties on Your IRA Assets, Did Your Roth IRA Conversion Pass or Fail? and Roth IRA: Back to Basics.)

This question was answered by Denise Appleby
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