One of the complications with the tax code is not knowing when the tax year ends. This is certainly true with an IRA contribution. Though 2011 ended months ago, the tax year for some IRAs is just now coming to an end.
The good news out of all this is the IRS gives us some wiggle room to max out our IRAs every year. While you scramble to meet the tax deadline, it’s a good time to look into your IRA contribution too.
IRA Contribution Deadline
This year the 2011 tax deadline falls on April 17, 2012 which also happens to be the IRA contribution deadline. In fact, the contribution deadline always falls on the same day taxes come due. At least that is how it works for traditional and Roth IRAs.
While you are finishing (or starting) your taxes this year, it’s a good idea to look into adding more money to that IRA of yours, if it isn’t maxed out already. The 2011 IRA contribution limit was $5,000 ($6,000 for those over 50 or older). Even if you can’t meet that amount, every little bit counts when it comes to retirement. Plus it could lower your taxes or get you a bigger refund.
There is the other side. If you didn’t make any contributions for 2011, or don’t have an IRA set up yet, now is the time to open an IRA and make up for lost time. Funding a traditional IRA may allow you to deduct the amount from your taxable income.
What to Keep In Mind
If you have a retirement plan through work, you can still contribute to an IRA, assuming you meet the IRA income limits. The other issue is a no brainer, but make sure you have the money available to make the contribution. Insufficient funds or bounced checks, because someone forgot to put the money in the checking account, is a bad thing. The IRS doesn’t give a redo for that mistake.
If you plan on making a contribution before the deadline, make sure it’s for the 2011 tax year and not 2012. One of the easiest mistakes to make is have the wrong tax year marked. I’ve done it myself. Take the time to double-check the amount and tax year before hitting that submit button.
Lastly, if you don’t have an IRA or haven’t made any contributions for the year, now is a great time to get started. You can start an IRA and have it funded in a few minutes. I’d suggest setting up an automatic monthly deposit to make it even easier. That way, you can avoid the last-minute scramble next year.