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Top Tips on Making IRA Contributions

4/8/2014

 
If you made IRA contributions or you’re thinking of making them, you may have questions about IRAs and your taxes.  Here are some important tips from the IRS about saving for retirement using an IRA.

1.  You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.  There is no age limit to contribute to a Roth IRA.

2.  You must have taxable compensation to contribute to an IRA.  This includes income from wages and salaries and net self-employment income.  It also includes tips, commissions, bonuses and alimony.  If you’re married and file a joint return, generally only one spouse needs to have compensation.

3.  You can contribute to an IRA at any time during the year.  To count for 2013, you must make all contributions by the due date of your tax return.  This does not include extensions.  That means you usually must contribute by April.  If you contribute between Jan. 1 and April 15, make sure your plan sponsor applies it to the right year.

4.  In general, the most you can contribute to your IRA for 2013 is the smaller of either your taxable compensation for the year or $5,500.  If you were age 50 or older at the end of 2013, the maximum you can contribute increases to $6,500.

5.  You normally won’t pay income tax on funds in your traditional IRA until you start taking distributions from it.  Qualified distributions from a Roth IRA are tax-free.

6.  You may be able to deduct some or all of your contributions to your traditional IRA.  Use the worksheets in the Form 1040A or Form 1040 instructions to figure the amount that you can deduct.  You may claim the deduction on either form.  Unlike a traditional IRA, you can’t deduct contributions to a Roth IRA.

7.  If you contribute to an IRA you may also qualify for the Saver’s Credit.  The credit can reduce your taxes up to $2,000 if you file a joint return. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. You can file Form 1040A or 1040 to claim the Saver’s Credit.

8.  See Publication 590, Individual Retirement Arrangements, on IRS.gov for more about IRAs.

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  • Home
  • About
    • Book An Appointment
  • Accounting
    • Dashboard
    • Xero+Accountency
    • Xero Intro
    • AutoMagical Accounting
    • QuickBooks >
      • QuickBooks Updates
    • Store
  • Payroll
  • Taxes
    • Dashboard
    • Individuals
    • Businesses
    • Tax Stuff >
      • Individuals >
        • Income >
          • Debt Forgiveness
          • Foreign Income
          • Gambling Income
          • Unemployment
          • Other Income
        • Deductions & Credits >
          • Adoption
          • Charitable Contributions
          • Earned Income Tax Credit
          • Educational Expenses
          • Energy Tax Credits
          • Employee Business Expenses
          • Other Deductions and Credits
        • Affordable Care Act - Individuals
        • Children and Dependents
        • Death
        • Disabled Taxpayers
        • Educators
        • Health Care
        • Identify Theft
        • Marriage and Divorce
        • Military
        • Real Estate
        • Retirement Savings
        • Seniors
        • State Taxes
        • Record Keeping
        • Who Must File
        • Other Topics
      • Businesses >
        • Affordable Care Act - Businesses
        • Year-end Reporting Obligations >
          • 1099's
          • Health Insurance Premiums
          • Depreciation
          • Reimbursed Employee Business Expenses
          • Company Automobiles
        • Employment Tax Credits
        • Independent Contractors
        • Tax Credits and Deductions for Businesses
        • Other Business Topics
        • Required Business Posters
      • Amended Returns
      • IRS Notices and Problems
      • Tax Plan >
        • All About the Earned Income Tax Credit
        • 5 IRS Audit Red Flags
        • Retirement Plans for Sole Proprietors
        • Are You Claiming All of Your Tax-Deductable Business Expenses for 2015?
        • All About Past Due Tax Returns
        • Do You Need to File Form 1099s?
        • How to File an Appeal with the IRS
        • Why You Might Get a Letter from the IRS, and What to Do
        • How to File an Amended Tax Return
        • Should You Claim the Home Office Deduction?
        • How to Avoid -- And Deal with -- Identify Theft
        • Q & A: IRS Audits
        • Are You Using the Right Business Structure?
        • Starting Planning for 2015 Income Taxes Now: 5 Tips
        • What You Need to Know About Estimated Taxes
        • Contractor or Employee? How the Income Tax Obligations Differ
        • The New Form 1095-A: Reporting Health Insurance Coverage
        • Are Your Social Security Payments Taxable?
        • Do You Qualify for the Earned Income Tax Credit?
        • Are You Eligible for Health Insurance Tax Credits
        • Employee Retirement Plans - Tax Advantages and Other Benefits
        • 5 Business Tax Credits You May Be Missing
        • New Business in 2012
        • Is it a Bad Debt or a Simple Revenue Loss? Telling the Difference
        • Business Taxes Add Complexity: How Will This Affect You?
      • Tax Scams