There's Still Time to Fund Your IRA

Category: Retirement

Remember that you have until you file your tax return to make a contribution to a Traditional IRA or Roth IRA for the 2016 tax year. The annual maximum contribution amount is $5,500 or $6,500 if you are age 50 or over. However, if you or your spouse are an active participant in an employer's qualified retirement plan, you may not be able to contribute the maximum amount. It depends on whether your modified adjusted gross income (MAGI) exceeds certain income thresholds. The limits for both Traditional and Roth IRAs are: 2016 Note: Married IRA limits depend on whether either you, your spouse or both of you participate in a qualified employer provided retirement plan. If married filing separate and either spouse participates in an employer's qualified plan, the income phaseout to contribute is $0 - $10,000. How does the phase out work? If your income is below the "full contribution" amount noted above, you can contribute up to the maximum annual contribution. If your income is above the "phase out complete" amount, you cannot make tax-advantaged contributions separate from your employer plan. If your income falls between these ranges, this is how you calculate the reduced amount you can contribute: Subtract your income from the higher (phase out complete) amount to get your contribution income potential. Next calculate the phase-out range. Divide your contribution income potential by the phase-out range. Take the result times your maximum annual contribution amount. Example: Roth IRA contribution limit for a single person, age 40 with MAGI of $122,000; $10,000 contribution income potential (132,000-122,000); divided by phase-out range of $15,000 ($132,000 – 117,000); 10,000/15,000= .666 x $5,500 = $3,663 2016 ROTH IRA contribution limit. Rounding rules apply. If it's too late for you to make a 2016 contribution, it’s not too late to plan for 2017. Here are the limits for 2017. 2017 A final thought If your income is too high to take advantage of these IRAs you can always make non-deductible contributions to a retirement account. While the contributions are taxed, tax on the earnings is deferred until they are withdrawn.

984,000 Could Lose their Tax Refund

Last week the IRS announced it is holding $917 million in unclaimed refunds for the 2009 tax year. If the claims for these unpaid refunds are not made by April 15^th the refunds will no longer be available. Here is what you need to know:

1.   Timely filing. To receive the refund your 2009 tax return must be properly addressed, mailed, and postmarked by April 15^th. It is best to send this certified mail in case there is a dispute with the filing of the return. To play it safe, it is also best to plan for the IRS to receive the return prior to April 15^th.

2.   Haven’t filed a tax return? There is no penalty for filing a late return that qualifies for a refund.

3.   There may be delays. If you have not filed a 2010 or 2011 tax return, your refund may be granted, but delayed until the other tax returns are filed. In addition, the refund may be used to pay for any unpaid tax obligations.

4.   It will be tough. Remember all of the country is busy preparing 2012 tax returns, so getting help can be a challenge.

If this impacts you, act now. If you fail to file a tax return, the government can collect any taxes owed long after three years. However, if the government owes you money, you only have three years from the original tax filing due date to collect it. There are no exceptions to this time limit.