Tax Day is April 18th this Year. There’s still time to do some last minute planning to save yourself some taxes. Take a look.
Last-minute retirement account contributions.
401(k)s and 403(b)s are tough becausec you have to have made your contributions as you go. Consider talking to HR about diverting a bonus check into the account if you can.
IRAs are simple. You can contribute any time until you file your return. You can contribute up to $5,500 in 2014. Don’t forget about the $1,000 catch up if you’re older than 50.
Almost everyone I’ve ever worked with is confused by the contribution limits. Read them for Roth IRAs and Traditional IRAs.
Little tricks for IRAs: You can make a separate payment for custodian fees, brokerage commissions, etc. in excess of the contribution limit. That will allow you to get the maximum value from the account.
Consider establishing a an HR10/Keogh Plan or a SEP IRA.
- Keogh plans were very popular for self-employed people prior to 2001. There was a tax law change in 2001 and now they’re largely replaced by SEP IRAs.
- They have the same contribution limits but the SEP paperwork is much simpler.
- A Keogh plan has to be established by the end of the year but it can be funded prior to filing your return.
- A SEP IRA can be established after the end of the year and funded after the end of the year.
- The maximum contribution is the lesser of 20 percent of earned income, less your deduction for half your self-employed payroll tax, before the deduction, or $52,000. (This winds up being 25% of net earned income after the deduction.)
- Remember that you can have one of these plans in addition to a 401(k) and an IRA.
Don’t forget about the HSA. If you’re covered by a HDHP, you can make your HSA contributions any time up till you file your return. Your contribution limits are $3,300 for an individual and $6,550 for a family. Remember also that there’s a $1,000 catch-up contribution for 55+. This won’t save you on your employment taxes but it will save you on your income taxes.
One final little trick on IRAs. Look to see if you’ll be eligible for a saver’s credit. If you’re at a low income level, this might help you…even if you can’t afford to save for retirement. If you need to and you want to be aggressive, you can contribute to your Roth in December, take the savers credit on your return, and then take the distribution in January. (You’ll owe tax on any gain but not on the contributions/basis.)
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