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Ten Tips for Taxpayers Contributing to an Individual Retirement Plan

If you haven’t made all the contributions to your traditional Individual Retirement Arrangement that you want to make – don’t worry, you may still have time.  Here are the top 10 things the Internal Revenue Service wants you to know about setting aside retirement money in an IRA.

  1. You may be able to deduct some or all of your contributions to your IRA. You may also be eligible for the Savers Credit formally known as the Retirement Savings Contributions Credit.
  2. Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means contributions for 2009 must be made by April 15, 2010. Additionally, if you make a contribution between Jan. 1 and April 15, you should designate the year targeted for that contribution.
  3. The funds in your IRA are generally not taxed until you receive distributions from that IRA.
  4. Use the worksheets in the instructions for either Form 1040A or Form 1040 to figure your deduction for IRA contributions.
  5. For 2009, the most that can be contributed to your traditional IRA is generally the smaller of the following amounts: $5,000 or $6,000 for taxpayers who are 50 or older or the amount of your taxable compensation for the year.
  6. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit equal to a percentage of your contribution.
  7. You must use either Form 1040A or Form 1040 to claim the Credit for Qualified Retirement Savings Contribution or if you deduct an IRA contribution.
  8. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.
  9. You must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment to contribute to an IRA. If you file a joint return, generally only one of you needs to have taxable compensation, however, see Spousal IRA Limits in IRS Publication 590, Individual Retirement Arrangements for additional rules.
  10. Refer to IRS Publication 590, for more information on contributing to your IRA account.

Both Form 8880 and Publication 590 can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Source: IRS.gov

By |2010-02-09T01:34:15+00:00February 9th, 2010|Individual Income Tax, Traditional IRA|0 Comments

About the Author:

Lauryn Charles owns and manages Accountable Financial Services Group, Inc., founded in July of 2007. Lauryn has many years of experience working with small business owners in the field of accounting, banking, and financial services. An accounting graduate with an MBA in International Business from Florida Atlantic University, Ms. Charles is an expert tax preparer and accountant. She is a Registered Tax Return Preparer as designated by the Internal Revenue Service. Ms. Charles is a member of the Pompano Beach and Deerfield Beach Chamber of Commerce. She is on the board of directors of multiple non-profit organizations, she is the co-founder of Pompano’s Young Professionals, and serves many other charitable organizations in the area.

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