It’s now less than 3 weeks to the April 15th Tax Deadline, and we’ve got three letters to pass along to procrastinating taxpayers: IRA.
A contribution to your individual retirement arrangement is about the only new tactic available at this late date to shave some income off a 2016 return. Taxpayers can add money to their accounts or start a new IRA until their returns are due on April 18.
Most taxpayers can put as much as $5,500 into their accounts, and those over age 50 can bump that up to $6,500. On the standard Form 1040, look at Line 32, which is where IRA deductions take place.
There’s also a sweetener for many low and middle-income families. Any additions to various retirement accounts make them eligible for the Retirement Savings Contributions Credit, a relatively new tax credit based on IRAs. Check Line 51 on the Form 1040. The credit applies to marrieds with up to $61,500 in adjusted gross income and to singles making to $30,750.
For minimizing taxes, we’re mostly talking about the traditional IRA. Your yearly contribution goes into the account tax-free, but you pay federal tax on it and any gains when you withdraw money during retirement.
Taxpayers also can add to their Roth IRAs until April 18, but a contribution now won’t help to cut back income for 2016. That’s because Roth money never gets a tax break going into the account. However, contributions plus any gains are tax-free on the way out during retirement.
Here’s one little-noticed deadline that is important for baby boomers who turned age 70½ during 2016. The IRS deadline for starting required withdrawals from their traditional IRAs – and most other retirement-related plans – is April 1. They’ll have to work fast.
Let’s leave more details, such as income limits for contributions, etc., to the financial folks. If you have enough energy to go solo, they also are covered in IRS Publication 590-A. But don’t forget, too, that Eric Buechler, owner of EricJohn Ltd., can help taxpayers deploy those IRA contributions expertly in these last weeks of the tax season.