Since it is Wednesday here is a quickie ASK THE TAX PRO -
Q. I've been following your blog for some time now, but never had a question to ask that I couldn't find an answer to online. Right now I have a really puzzling one that I can't seem to find an answer for anywhere on the internet.
I understand that a person's ability to contribute to a Roth IRA may be partially or fully restricted due to income limits. I recently read about a Fidelity Retirement Rewards American Express Card that contributes 2% “cash-back” into a Fidelity IRA account for you. Their fine print says that it is up to the cardholder to ensure that they comply with all legal regulations.
Because the contribution is coming from American Express or Fidelity, rather than directly from me, does that mean that those contributions would be allowable in full regardless of income?
A. The IRA contributions are NOT coming from American Express or from Fidelity - they are coming from you!
American Express will pay you a "cash-back" bonus. Instead of sending you a check for the bonus they will directly deposit the bonus into an IRA account in your name at Fidelity.
You still must personally satisfy the AGI income limitations in order to be able to contribute to a ROTH account. If you cannot have a ROTH because of your AGI the "cash-back" bonus would have to be deposited to a "traditional" IRA, and the normal rules would apply to determine if the contributions would be deductible.