There’s Still Time To Contribute To Your IRA for 2021

There’s Still Time To Contribute To Your IRA for 2021

If you haven’t yet made a contribution to your IRA for 2021, you still have time. The deadline is the same as the tax-filing deadline: April 18, 2022. What’s more, if you plan to make a contribution by that date, you may be able to claim the deduction on your 2021 tax return.

 

Know Your Traditional IRA

An Individual Retirement Account (IRA) is a tax-advantaged personal savings plan that lets you set money aside for retirement. Generally, you can contribute up to $6,000 to your IRA for 2021. If you were 50+ by December 31, 2021, you can add another $1,000 to that limit. Depending on your status, your contributions to one or more traditional IRAs may be deductible up to the contribution limit or 100% of your compensation, whichever is less.

If you make contributions to employer retirement plans, such as a 401(k) or 403(b), an IRA, or an Achieving a Better Life Experience (ABLE) account, may also be able to claim the Saver’s Credit. Also known as the Retirement Savings Contributions Credit, the amount of the credit is generally based on the amount of your contributions, your adjusted gross income and your filing status (see the chart below).

 

Know Your Roth IRA

While you may contribute to a Roth IRA, you cannot deduct those amounts. However, any qualified distributions you take at retirement age are tax-free. Note that Roth IRA contributions may be limited based on your filing status and income.

Please don’t hesitate to call us at 706-632-7850 with any questions. 

 

March 25th Deadline

March 25 is the last day we can accept materials to file your Personal Tax Return by the April 18 due date. If you’re running late, we’ll be happy to file an extension for you. Please bring your paperwork to our office during regular business hours, or drop it off in our after-hours dropbox. Our 2021 Personal Tax Preparation Checklist will help make sure you provide everything we need.

Remove Excess Salary Deferrals by April 15, 2022

If you contribute to a retirement plan at work, you are allowed a total of $19,500 (plus an additional $6,500 if age 50+) in salary deferrals. If you exceeded this limit in 2021, however, you must withdraw any excess deferral amounts, plus earnings, by April 15, 2022.

If you withdraw the excess salary deferrals, plus earnings, by April 15:

  • Excess deferrals are taxed in the calendar year deferred (2021).
  • Earnings on the excess are taxed in the year withdrawn (2022).
  • Excess is not subject to the 10% early distribution tax, 20% withholding, or spousal consent requirements.

If you do NOT withdraw the excess salary deferrals, plus earnings, by April 15:

  • Excess deferrals are taxed in the calendar year deferred (2021) and again in the year withdrawn.
  • Earnings on the excess are taxed in the year withdrawn.
  • Withdrawals may be subject to the 10% early distribution tax, 20% withholding, and spousal consent requirements.

If you made contributions to more than one retirement plan, you may have accidentally gone over the limit. If you’re not sure, contact us today for help determining this amount.

Retirement Plan Update: Important Changes to RMD Rules for 2020

Retirement Plan Update: Important Changes to RMD Rules for 2020

If you have an IRA or other qualified retirement plan and you are 70+, you’ll want to know about a special rule change made in response to the COVID-19 pandemic. Under the Coronavirus Aid, Relief and Economic Security (CARES) Act enacted in March, you will not have to take a Required Minimum Distribution (RMD) from your retirement account for 2020.

As a reminder, RMDs are the required withdrawal you must take from your qualified retirement plan (IRA, SIMPLE IRA or SEP IRA) each year after you reach age 70½. Note that Roth IRAs do not require withdrawals until after the death of the owner.

If you have an employer-sponsored retirement plan [e.g., defined contribution, defined benefit, 403(b) or governmental 457(b) plan], you must also begin RMDs in the year in which you reach age 70½ or the year you retire, whichever is later.

How the RMD Waiver Works

For 2020 only, Required Minimum Distributions are waived for all employer-sponsored retirement plans and IRAs, including inherited accounts. The only type of plan that the rule change does not apply to is an employer-sponsored defined-benefit plan (e.g., a traditional “pension” type plan). Here’s how the new rules work:

  • The waiver applies to RMDs due in 2020, but attributable to 2019. (If your first RMD year was 2019, and you took the RMD beforeFebruary 1, 2020, the 2020 RMD waiver does NOT apply. However, if you took the RMD between February 1 and May 15, 2020, you CAN take advantage of the 2020 RMD waiver.)
  • You do not need to meet any COVID-19 “qualifying criteria” to waive RMDs for 2020.
  • If you do not take an RMD in 2020, you will NOT be required to take two RMDs in 2021.

If you have already taken your RMD, you have the opportunity to roll it back into a retirement account should you want to. For distributions taken between Feb. 1 and May 15, 2020, the following rules apply:

  • Distributions must be rolled back into a retirement account by July 15, 2020.
  • For IRA-to-IRA rollovers, only one rollover is allowed per 12 months beginning from the day the distribution is received.
  • You can only roll over the same assets that were distributed. So, if 10 shares of XYZ company are distributed, you can only roll over up to 10 shares of XYZ company. If $5,000 in cash is distributed, you can only roll over up to $5,000 in cash.
  • Inherited and successor IRAs are not eligible to receive an IRA-to-IRA rollover; however, a spouse beneficiary can roll the assets into an IRA in their own name if the rules above are met.

Questions? We Have Answers!

With all that’s happening these days, these rules may very well change again. But for now, if you’re unsure about your RMD situation, contact us. We can help make sure the rules are followed so you are not penalized.

Stimulus Payment Update

Approximately 130 million people have received Economic Impact Payments (EIP) worth more than $200 billion in the program’s first four weeks. In Georgia alone, more than 4 million people have received nearly $7 billion in payments. The IRS has been sending out new batches of stimulus benefits every week, and is urging people to use Get My Payment by noon Wednesday, May 13, for a chance to get quicker delivery. You can check the status of your payment here.