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Tax Tips | Ten Tips for Taxpayers Contributing to an Individual Retirement Plan (IRA)
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Ten Tips for Taxpayers Contributing to an Individual Retirement Plan (IRA)
March 29, 2010
If you haven't made all the contributions to your traditional Individual
Retirement Arrangement (IRA) that you want to make -- don't worry, you may still
have time.
Here are the top 10 things from the Internal Revenue Service
(IRS) 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 http://IRS.gov or ordered by calling 800-TAX-FORM
(800-829-3676).
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