TaxByte 2016-3

There's Still Time to Contribute to Your Retirement Plan for 2015

Individual Retirement Accounts

You still have time to make that IRA contribution.  For this year and only this year we have until April 18, 2016, to make that contribution and have it eligible for an adjustment to income if it meets the requirements. IRS issued Tax Tip 2016-39 on March 14, 2016, summarized below.

Some things to remember include:

  • The client must be under age 70½ at the end of the tax year in order to contribute to a traditional IRA
  • There is no age limit to contribute to a Roth IRA
  • The client must have taxable compensation to make a contribution to the IRA
  • The client can contribute to an IRA at any time during the year
  • The client must contribute by the due date of their tax return, this does not include extensions
  • This means most people must contribute by April 18, 2016
  • If they contribute between Jan. 1 and April 18, make sure the plan sponsor applies it to the year they chose (2015 or 2016)
  • In general, the most they can contribute to the IRA for 2015 is the smaller of either thier taxable compensation for the year or $5,500
  • If the client is age 50 or older at the end of 2015, the maximum they can contribute increases to $6,500
  • If they contribute more than these limits, an additional tax  of 6% will apply to the excess amount contributed that is in the account at the end of the year   
  • The contribution you may also qualify for the Saver’s Credit
  • If an employer does not offer a retirement plan, the client may want to consider myRA. It is a new retirement savings plan offered by the U.S. Department of the Treasury