We’re getting down to the wire for filing your 2010 Form 1040 Individual Income tax return. If you don’t have all your information together yet or have any questions on how to file something, file an extension. In fact, there is any question whatsoever…file an extension.
There is one action you do need to take right away. Fund your IRA. Generally, you have until the filing date of your return (so either 9/15/11, for S Corporations, or 10/15/2011 for other businesses with a 12/31 year-end), if you do an extension) to fund your SEP, Solo 401(k) or other business-related pension plan. But the IRA doesn’t get the same treatment. It must be funded by 4/15/11.
- You can make an IRA contribution for up to $5,000 or the amount of your earned income, whichever is less.
- You don’t have to make the whole amount as a contribution (in other words, it’s not all or nothing.)
- The ROTH IRA is not deductible from your income. The regular IRA is deductible from your income.
- If you have a business with money in it and you didn’t set up your business pension plan before 12/31/10, you still have a chance of doing the SEP. If you have a lower salary, usually you’ll get more of a deduction with the IRA then the SEP.
- You can make an IRA deduction if you also have a qualified retirement plan at a job. The amount that is deductible starts to phase out at approximately $89,000 income.
Quickly check in with your tax practitioner to find out how whether an IRA makes sense for you this year. And if you make the decision to do one, make sure you fund it before 4/15 (now extended to 4/18) this year.
And if you’re not quite ready to file your taxes, make sure you extend your return with Form 4868.
Also, if you’ve got a C Corporation, with a different fiscal year-end date, the above won’t apply to you. You’ll have an entirely different set of deadlines to set up and fund a business pension plan. Talk with your CPA about the dates you need to take action by!
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