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Do you know there is still time to contribute to the Individual retirement arrangement(IRA) for 2014

Posted by kftaxaccounting2014 on April 23, 2015 in Uncategorized | 1 comment

Is saving for retirement so hard that you feel it cannot be achieved?The individual retirement arrangement(IRA) is designed by the IRS to enable self employed people and employee save for retirement.

There are two types of IRA which is the traditional and roth. If you have a qualifying income,then you can set up either the traditional or roth IRA or better still, add money to existing account.Contributing to traditional IRA are often deductible, but distribution,usually once you are above 59½ years of age are usually taxable.Contribution to roth IRA are not deductible,but distribution usually after your 59½ years of age are tax-free.Following the year you turn 70½,everyone with the traditional IRA must start receiving distribution by April 1,but this does not apply to those with the roth IRA.

Also if you want to make your IRA count for  2014,you  have to contribute by April 15 2015.In addition to this,if you fall under the low or moderate income tax payer and you made the IRA contribution,you may qualify for the saver’s credit when filing for your 2014 tax returns if you have not already done so.

The saver’s credit also known as the retirement saving contributions credit is available for you if your adjusted gross income falls below certain level. If you are single or married and filing a separate return  then the income limit is $30,000, $45,000 for head of household and if you are married and filing a joint return the limit is $60,000.Like other tax credit, the saver’s credit can reduce the amount of tax you owe or increase your tax refund but this  credit is based on how much you contribute to either the traditional or roth IRA  and other qualifying retirement program.

The maximum amount you can contribute to traditional IRA vary depending on your age,If you are below 50years of age then the maximum you can contribute is $5500,but at the end of 2014 if you are 50years old,then the maximum you can contribute is $6500. Lastly,if you are 70½years old by the end of 2014,then you cannot contribute to traditional IRA for 2014 and subsequent years.But for roth IRA,you should know there is no limit to how much you can contribute.

If your income is above certain level and you are covered by your workplace retirement plan, then you should know your deductible for contributions to traditional IRA may be phased out.If your modified adjusted gross income(MAGI) is between $60,000-$70,000 and you are single or head of a household,or your MAGI is between $0-$10,000 and you are married but filing separately,then your workplace coverage for any part of 2014 will be phased out.Furthermore,if you are married and filing jointly,and either you or your spouse making the IRA contribution is covered by the workplace retirement plan,the income phase-out range is $96,000-$116,000 but if the IRA contributor is not covered by the work place retirement plan but is married to someone who is covered,the MAGI phase-out range is $181,000-$191,000.

As for you that chose the roth IRA,even though your contributions are not deductible,if your income is above certain level,then you should know that the maximum permitted amount of your contribution will be phased-out.For married couples filing jointly your MAGI phase out is between $181,000-$191,000, and $0- $10,000 if you are filing separately but if you are single or head of household then your MAGI phase-out range is $114,000-$129,000.

This may look so confusing and overwhelming, but that’s why we are here to help you maximize your retirement savings!

 

 

Director, Tax and Accounting
Tax Accountant specialized in Tax Accounting, IRS Representation & Resolution of Complex Tax Matters, Individual and Corporate Tax planning, and Tax Advisory Services.

Specialties: Tax Resolution, Tax Planning, Financial Planning and Analysis, Budget Management, Payroll Management, Cost Management and Optimization, SAP, Oracle, Hyperion, PeopleSoft

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