As an employee, you contribute funds toward your Social Security retirement benefits with every paycheck. But the Social Security Administration estimates that Social Security benefits currently meet only about 40 percent of retirement needs (at the time of publication), and many analysts expect benefits to dip in the future. You’ll likely need another source for retirement funds, and planning ahead makes a difference in the quality of your retirement years. The Internal Revenue Service allows you to contribute to your retirement fund for the previous year up until the first working day after April 14, usually April 15 or April 17. This date is also the deadline for filing your federal income taxes without an extension.
File Taxes Early
If you file your income taxes early and online, you’ll likely receive your refund before the April 15 or April 17 deadline for contributing to your traditional individual retirement arrangement. You can deduct the contribution for a traditional IRA on your taxes if you haven’t already made the maximum contribution for the previous tax year. Roth IRA contributions aren’t reported on your federal income taxes, as you pay taxes before contributing to your Roth IRA. You must notify the sponsor or manager of your IRA that your contribution is for the previous year or the manager assumes the payment applies to the year in which you make the contribution.
Distribute your tax refund into more than one account with the use of IRS Form 8888. You can have your full refund or a portion of your tax refund deposited directly into your traditional IRA account or your Roth IRA account. You can also distribute your tax refund into more than one retirement plan with the use of IRS Form 8888.
If you request an extension to file your federal income taxes, any refund will miss the April 15 or April 17 deadline required to contribute to last year’s taxes. Use the tax refund for a contribution to your retirement plan for the current year by completing IRS Form 8888 for direct deposit. You can also receive the refund in your personal bank account and make a contribution to your retirement account when it’s convenient. You have until the first working day after April 14 of the following year to make your contribution for the previous year.
You must work during the tax year and have compensation to qualify for an IRA contribution unless your spouse has qualifying compensation or you receive alimony or similar income. You must be under age 70 1/2 to contribute to the traditional IRA, but you can contribute to the Roth IRA at any age. If you're using a tax refund to fund your retirement account, you’ll need to have money paid to the IRS during the previous year in excess of the amount that covers your federal income taxes. You can’t have federal liens against you or you'll have no refund available to contribute to your retirement account. If you contribute less than the maximum, you can’t make up the difference with a late contribution. You only have one window of opportunity to contribute to your IRA each year -- during the year or prior to the first working day after April 14 the following year.
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