The Internal Revenue Service (IRS) today reminds taxpayers that there is still time to contribute to a retirement account IRA for 2015 and in many cases, may qualify for a deduction or a tax credit up.These tips are designed to help taxpayers navigate issues on common tax issues while the deadline of April 15 approaches.
What are IRAs?
Individual Retirement Arrangements (IRAs) have been available in one form or another since the mid-70s and are designed to allow employees and individuals working on their own to save for their retirement. Contributions to traditional IRAs are often deductible, but distributions after 59½ years of age are generally taxable. Although contributions to Roth IRA type plans are not taxable, qualified distributions, usually after age 59 ½ are tax free. Those with traditional IRA plans should begin receiving distributions for April 1 of the year after you turn 70½, but there is no similar requirement for type Roth IRA plans.
Traditional IRA or Roth IRA
Most taxpayers with incomes that qualify are eligible to open a traditional IRA or Roth type or add funds to an existing account. To ensure that contributions will have 2014, you must make before April 15, 2015. In addition, taxpayers with low and moderate income making these contributions could also qualify for Savings Tax Credit when filing your 2014 tax .
How much can you contribute to an IRA?
Eligible taxpayers can contribute up to $ 5,500 to an IRA retirement account type. For someone who had at least 50 years of age at the end of 2014, the limit increases to $ 6,500. There is no age limit for those who contribute to a Roth IRA plan type but people who had at least 70½ years old at the end of 2014 no longer able to make contributions to a Traditional IRA retirement plan for 2014 and subsequent years.
Deduction for Traditional IRA on Tax Return
The deduction for contributions to a Traditional IRA type usually being phased out for taxpayers with incomes above certain limits that have retirement plans offered by your employer. For someone who was covered by a retirement plan your employer during any part of 2014, the deduction is phased out gradually if your modified adjusted gross income (MAGI) for the year is between $ 60,000 and $ 70,000 for singles and head of the family and between $ 0 and $ 10,000 for married individuals filing separately.
Getting an IRA Deduction
For married couples filing joint return, where the spouse making the contribution is covered by a retirement plan from your employer, the amount of revenue it would begin eliminating the deduction is $ 96,000 to $ 116.000 US dollars. In cases where the taxpayer to an IRA retirement account has no retirement plan from your employer, but who is married to someone who has retirement plan covered by the employer, the amount of the deduction is phased out from income between $ 181,000 and $ 191.000 US dollars.
Claiming IRA Deduction on Tax Return
The deduction for contributions to a traditional IRA retirement rate is claimed on line 32 of Form 1040or line 17 of Form 1040A Any nondeductible contributions made to a traditional IRA must be reported on Form 8606
Contributions to retirement accounts Roth IRAs are not taxable
Although contributions to retirement accounts Roth IRAs are not taxable, the maximum allowable amount of these contributions is phased out for taxpayers whose income exceeds certain limits. The amounts of modified adjusted gross income (MAGI) gradually eliminating the deduction is between $ 181,000 and $ 191.000 US dollars for married filed jointly. Between $ 114,000 and $ 129.000 US dollars for singles and heads of household and $ 0 to $ 10,000 for married filing separately. For detailed information on contributions to retirement accounts type Traditional or Roth IRA, including worksheets to determine the amounts of contributions and deduction, see Publication 590-A.
What is the Retirement Saver’s Credit?
The Savings Tax Credit, also known as the Credit for Contributions to a Retirement Savings is often available to people who contribute to IRA retirement accounts, and whose adjusted gross incomes below certain limits. By 2014, the income limit is $ 30,000 for singles and married individuals filing separate return, $ 45,000 for head of household and $ 60,000 for married filing jointly.
Getting the Retirement Saver’s Credit
Eligible taxpayers receive the credit even qualify for other benefits related to retirement. Like other tax credits, the Earned Savings can increase a taxpayer’s refund or reduce the amount of taxes owed. The credit amount is based on a number of factors, including the amount contributed to a retirement plan Roth or Traditional IRAs and other qualified retirement programs. The Form 8880 is used to claim the Earned Savings and instructions are details on how to calculate the credit correctly.