Kinda a three-part question ...
I'm a contractor who has some W-2 income (through an agency) and some 1099-MISC income. I thought it was gonna be a slow year for me, so I maxed out my Roth contribution and also converted $2000. I've also contributed close to the max for the 401K on the W2 job, and plan to do a maximum 18.5% SEP-IRA contribution off the sole-proprietor self-employment income. Turns out my AGI is looking like it's gonna be over $100K, disallowing the conversion and getting into the phase-out zone for contribution.
First question, am I computing "modifed AGI for Roth purposes" correctly ? I know to start with AGI. Then subtract the conversion $2000. I know you have to add back in a traditional IRA contribution, but it looks to me like the SEP-IRA contribution does NOT need to be added back in, because it's on line 28, not line 32, and only the latter has to be added back in. I also read somewhere that you have to add back in the adjustment for 1/2 self- employ tax, but Pub 590 doesn't seem to show that.
Second, is there ANY way to reduce my AGI now that the year has ended ? I guess the $3K+ that I fell short of maxing out the W2-job 401K is water under the bridge. The only other thing I can think of, I haven't billed for December on the 1099 job yet. Is that income reportable the year the work was done, or the year I bill it and get paid ? If the former, can I somehow defer it ? (I suppose I could "forget" to put it on my December bill, and then remember it when I bill for January, but that sounds likely to be illegal).
Third, if I *am* screwed (my AGI is over $100K, but I guess I shouldn't REALLY be complaining about that :-), how should I proceed. How big a pain is it to remove the excess Roth contribution ? Mainly I'm wondering how the heck I go about computing the earnings on the excess, since of course that must be removed too. I DON'T think I want to recharacterize, because my SEP-IRA is all pre-tax money now, and I don't want to end up with some after-tax money in there (since the recharacterized contribution won't be deductable, since my income is high and I had the 401K plan).
Thanks much, John