2011 Eligible IRA Contribution Deadline Extended to April 17, 2012
Many expats use Individual Retirement Accounts, or IRAs, to create savings for future retirement. IRAs can be preferable to an ordinary savings account because some or all contributions may be tax-deductible, and there may be other ways to use your IRA contributions to lessen your tax burden. One of the great things about the IRA is that you can designate contributions made between January 1 and the tax due date to count against the prior year’s tax liability. In other words, a $1,000 contribution made in February of 2012 could be used on your 2011 tax return or your 2012 tax return, depending on how you decide to claim it.
This year, you have two extra days to make contributions to your IRAs because April 15 falls on a weekend and Emancipation Day, a legal holiday in the District of Columbia, will be observed on Monday, April 16. That means the due date for filing your tax return and making contributions to your 2011 IRA is Tuesday, April 17.
The Top 10 Things the IRS Wants You to Know
When setting aside retirement money in a traditional IRA:
- You may be able to deduct some or all of your contributions to your IRA. You may also be eligible for the Savers Credit, formally known as the Retirement Savings Contributions Credit.
- Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means you must make contributions for 2011 by April 17, 2012. If you contribute between Jan. 1 and April 17, you should designate the year targeted for the contribution.
- The funds in your IRA are generally not taxed until you receive distributions from it.
- Use the worksheets in the instructions for either Form 1040A or Form 1040 to figure your deduction for your IRA contributions.
- For 2011, the most you can contribute to your traditional IRA is generally the smaller of the following amounts: $5,000 for most taxpayers, $6,000 for taxpayers who were 50 or older at the end of 2011 or the amount of your taxable compensation for the year.
- Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit equal to a percentage of your contribution.
- You must use either Form 1040A or Form 1040 to deduct your IRA contribution or claim the Credit for Qualified Retirement Savings Contributions.
- You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.
- To contribute to an IRA, you must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment. If you file a joint return, generally only one spouse needs to have taxable compensation. However, see Spousal IRA Limits in IRS Publication 590, Individual Retirement Arrangements, for additional rules.
- Refer to IRS Publication 590 for more information on contributing to your IRA account.
Saving on Expatriate Tax Returns
Retirement accounts are just one of many items to consider when looking for ways to reduce your expat tax liability. If you have any questions about your US expatriate tax returns, please do not hesitate to contact us at http://www.greenbacktaxservices.com/contact/.
