April 15 is approaching fast! The IRS reminds us that it is not too late to contribute to a traditional IRA for 2008. Below are ten last minute tips from the IRS on IRA contributions.
- You may be able to deduct some or all of your contributions to your IRA and you also may be eligible for a tax credit equal to a percentage of your contribution.
- 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 2008 must be made by April 15, 2009.
- The amount of funds in your IRA are generally not taxed until you receive distributions from that IRA.
- To figure your deduction for IRA contributions, use the worksheets in the instructions for the form you are filing.
- For 2008, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,000 or the amount of your taxable compensation for the year. Taxpayers who are 50 or older can contribute up to $6,000.
- Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit.
- You cannot deduct an IRA contribution or claim the Credit for Qualified Retirement Saving Contributions on Form 1040EZ; you must use either Form 1040A or Form 1040.
- To contribute to a traditional IRA, you must be under age 70 1/2 at the end of the tax year.
- You must have taxable compensation, such as wages, salaries, commissions and tips. If you file a joint return, only one of you needs to have compensation.
- Refer to IRS Publication 590, Individual Retirement Arrangements, for information on the amounts you will be eligible to contribute to your IRA account.
Note that both Form 8880 and Publication 590 can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).