Tax Time

It’s tax time and that means 14 more days until your deadline for 2011 Traditional IRA and Roth IRA’s contributions are due. The official deadline is Tuesday, April 17th, 2012 so make sure and get your contributions in soon. Any contributions made to a Traditional IRA will affect your taxes and must be included on your tax form.

If you are automatically depositing to your IRA make sure your tax accountant knows what you deposit for 2011. Many automatic deposit plans are set up to code the deposit in the year it is deposited. For example if you make deposits from your bank account each month, the January, February, March and April deposits will be coded for 2012 unless you notify the institution that you want them credited to 2011. If you have a full year of deposits this won’t matter, but if you start or end in the middle of the year, make sure to double check the deposits and what year they are coded for.

If you have a Roth IRA, those contributions are after-tax money and will not affect your taxes this year. The biggest plus to a Roth IRA is there are no mandatory withdrawals when you hit the magic age of 70 and one half, and they have tax-free withdrawals after you are 59 and one half. Your tax refund is a great way to fund Roth IRA‘s. To make a contribution there are some income limits and you must have earned income to contribute. Check to make sure you can contribute.

Another way to start a Roth IRA is converting your current IRA‘s to a Roth. There is no income limitation this year and it’s easy to do. If the market is down it is one of the best times to convert as you move assets with a lower value into an account that has tax free gains. Ask if this is appropriate for you.