Well, the IRS seems to say that we cannot do it. Here is my question and the reply I received:
Your Question Was:
I ve read a lot of the info, but I’m still not clear on whether a
U.S. citizen whose income is 100% foreign earned can make
contributions to IRAs. I have a Roth IRA in the U.S., but live and
work in Taiwan. My income is about $20,000 US a year, so I am clearly
under the $80,000 income exclusion. Can I still contribute the $4,000
for 2004 to my Roth IRA? Thank you so much for your assistance.
The Answer To Your Question Is:
Thank you for your inquiry. Publication 590 contains IRA
information. You may access Publication 590 directly from our web
site WWW.IRS.GOV. In order to contribute to any IRA, you must have
taxable compensation. That means taxable in the United States. I have
copied the following for you from Publication 590.
The most that can be contributed to your traditional IRA is the
smaller of the following amounts:
$3,000 ($3,500 if you are 50 or older; for 2005, $4,000 or $4,500, if
50 or older), or
Your taxable compensation (defined earlier) for the year”.
I was not clear as to whether your $20,000 U.S. income will be
under the excluded limit or in excess of the limit. [color=red]If your taxable
income falls below the excluded limits, you are not able to make any
type of an IRA contribution unless you are married filling jointly
with a spouse who will have taxable compensation. [/color]There are also
other contribution rules that you may read about in Publication 590.
I have only addressed the taxable compensation portion of the
[color=violet]Uh Oh. Why such conflicting info from tax advisors? Could the rules have changed in the past year or two? I’ll also check with American Century, the company that manages my Roth IRA. In the meantime, if anyone checks again with someone different, let us know if they shed any more (or more recent info on the subject![/color]