IRAs are based on taxable income the year for that year. As long as you are working on a qualified visa you can have an IRA.
This quoted statement is far more restrictive than the statutory requirements.
Individual retirement accounts ("IRAs") are authorised by 26 USC § 408(a)(1), which provides that an IRA is a trust satisfying a number of conditions, including that the written instrument governing the trust provides that contributions to the trust will not be accepted in excess of the maximum defined by 26 USC § 219(b)(1)(A). Meanwhile, 26 USC § 219(b)(1)(A) says that maximum is the lesser of (i) the maximum deduction, and (ii) the "compensation includible in the individual's gross income for such taxable year". According to 26 USC § 219(f)(1), the term "compensation" includes "earned income" as defined in 26 USC § 401(c)(2). Pursuant to 26 USC § 401(c)(2), "earned income" means "net earnings from self-employment" (as defined in 26 USC § 1402) but only "with respect to a trade or business in which personal services of the taxpayer are a material income-producing factor", and subject to some technical requirements. (Note that this statutory definition of "earned income" is more restrictive than we often use the term on this forum.)
Here are a few highlights of the law, compared to the restrictive statement above:
First, a "visa" is neither necessary nor sufficient to work legally in the USA.
In US immigration law, a visa is a document that, if required, authorises an alien to travel to a port of entry and seek admission to the USA. A visa does not entitle an alien to be admitted to the USA: 8 USC § 1201(h). On that basis alone, we can see that a visa, "qualified" or otherwise, is not sufficient to work legally in the USA. It is also not necessary as will be described below.
Pursuant to 8 USC § 1324a(a)(1)(A), it is unlawful for an employer to hire an alien knowing that said alien is an "unauthorized alien". Pursuant to 8 USC § 1324a(h)(3), an "unauthorized alien" is an alien who is neither (i) an alien lawfully admitted for permanent residence, nor (ii) authorised to be employed by 8 USC or by the Attorney General.
Based on this, you can see immediately that having a visa is not necessary for lawful employment, because of the "or by the Attorney General" branch of the test, which cloaks the Attorney General with authority to authorise employment on any basis she deems fit, subject to the general principles of administrative law. This is part of the legal basis for Obama's various programs granting work authorisation to certain aliens who entered the country illegally.
Even the "authorised by 8 USC" part of the test does not necessarily require a visa. A visa does not control the legal status of the alien inside the USA. That is controlled instead by the terms of admission as granted by the inspector at the border (8 USC § 1184) or as subsequently changed by the Secretary of Homeland Security once inside the USA (8 USC § 1258). A visa is not always required to seek admission to the USA for the purpose of working there. For example, under 8 CFR 212.1(a)(1), a visa is not generally required for citizens of Canada, even if they intend to work in the US. There are also a variety of other situations where a visa is not required to enter the US to work.
Having addressed the implicit suggestion that a "visa" is necessary or sufficient to work in the USA, I now turn to the implied suggestion that the work must be legal in order for the income therefrom to be eligible for contribution to an IRA. There is no explicit requirement for the work to the legal under immigration laws or otherwise in order for the worker to be eligible to contribute to an IRA. According to the Supreme Court, "the federal income tax is a tax on net income, not a sanction against wrongdoing":
Commissioner v. Tellier, 383 US 687 (1966). The remedy for unlawful work is found in immigration law in the form of sanctions imposed on the employer or employee, but not in the form of prohibiting an otherwise-lawful IRA deduction.
However, the Tellier court does say that a deduction may be disallowed if allowing it would "frustrate sharply defined national or state policies proscribing particular types of conduct" (quoting other cases). The Court gives the example of a fine paid to the government, which cannot be deducted as a business expense because that would reduce the amount of the fine and defeat the point of having specified a particular dollar value for the fine. It could be argued that allowing an IRA deduction for illegal work would encourage people to plan to retire in the US illegally, thus defeating national policy. However, I haven't located any extant case law on that topic, and the IRS doesn't appear to take that position. In sum, illegally performed work
may be eligible for an IRA deduction.
Finally I will address the implied suggestion that an alien must enter the US and work in the US in order to have income eligible for contribution to an IRA. That is not the case either. Under 26 USC § 871(b), nonresident aliens are taxed on income effectively connected with a US trade or business, if the nonresident alien "engaged in trade or business within the United States during the taxable year". Engaging in a trade or business in the US does not require working in the US or even entering the US. For example, you might own a business which is physically based in the US, but you personally work from abroad. The definition of "earned income" requires that the "personal services of the taxpayer are a material income-producing factor", but there is no requirement that those personal services be performed in the US.
So to review:
- a "qualified visa" is neither necessary nor sufficient to work legally in the US;
- illegally performed work may still be eligible for an IRA contribution if the other requirements are met; and
- there is no need for a foreign national to enter the US to contribute to an IRA because work outside the US can still be eligible if the other requirements are met.