There is still a week until the tax deadline on May 17 to contribute to the IRA 2020

The extended tax filing deadline gives many Americans additional time to contribute to certain 2020 investment accounts.

In March, the IRS postponed the due date for returns of individuals due to the coronavirus pandemic to May 17th from April 15th. It was also confirmed in March that the postponement of the registration deadline has also postponed the last day to contribute to the individual retirement accounts and Roth IRAs for the 2020 tax year.

The last day for such contributions is the registration deadline, which means investors have a week to sack away money for retirement.

“This is a rarity in the tax world,” said Ed Slott, CPA and Founder of Ed Slott & Co. “It is very rare in tax law that you will be given the opportunity to actually change or improve your position until the end of the year. ” for the previous year. “

People also have until May 17 to contribute to Health Savings Accounts, Archer Medical Savings Accounts, and Coverdell Formation Savings Accounts in addition to IRAs.

The benefits of IRAs

Both traditional and Roth IRAs can be powerful retirement planning tools over time if you’re looking to put money away from an employer-sponsored 401 (k) or aren’t offered it at work.

The accounts offer considerable savings potential. Those under the age of 50 can deposit up to $ 6,000 in a Traditional or Roth IRA 2020 account through 2020, and those over 50 can deposit up to $ 7,000 in the same year depending on their income.

Many Americans are within the income threshold to contribute the full 2020 amount to a Roth IRA. Individuals or those who are married and filing separately can contribute the full amount if their modified gross adjusted income is less than $ 124,000. If they earn more, they can contribute less than the full amount until the income reaches $ 139,000. From this point on, they are no longer eligible for funding.

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Married couples filing together and earning less than $ 196,000 can contribute the full amount for 2020, and eligibility expires at $ 206,000.

This year, some individuals may be able to use traditional IRA contributions to lower adjusted gross income and potentially qualify for the final round of stimulus testing. In general, contributions to a traditional IRA are deductible based on income and if you also have an employer-sponsored retirement plan. Roth IRA contributions are not tax deductible.

Double savings

Having more time to contribute to an earlier year gives you the option to double the savings if you are able to. By May 17, one could potentially save the full $ 6,000 for 2020 while also saving against 2021.

Of course, not everyone will be able to save that kind of money this year, Slott said. The coronavirus pandemic has left millions of Americans jobless, and many are still struggling to get back to work.

Others, however, have remained relatively unscathed from the pandemic and can make an additional contribution to their long-term savings. In addition, some people could go back to work a year after the pandemic started trying to replenish or build savings and could take advantage of the longer tax season.

“It’s good to know and not forget the date of May 17th,” said Slott. Even if you file an extension on your tax return, you have to contribute to the IRA by May 17 to bring that money up to last year’s max, he said.

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