Is It Really Tax Season Already? Are You Prepared?
Posted by Entrust Orange County on Mon, Feb 08, 2010
I don’t know about you, but tax season sneaks up on us every year. One moment we’re rushing through the holidays worrying about budgets and how much we are spending on holiday gifts and, in the blink of an eye, it’s time to file our tax returns. Perhaps you’ve been doing strategic tax planning with your financial advisor throughout the past year. But perhaps your life has flown by this year, and tax season snuck up on you like it has for so many Americans. If so, below are a few items to keep in mind as you prepare to file your taxes this April.
Did you know that you still have time to make an annual contribution to a Traditional IRA for 2009? Maybe during these uneasy financial times, you didn’t think you would receive a holiday bonus at work or reach your company goals. Let’s assume that after your company’s year-end, you actually qualified for a bonus or, perhaps due to your diligent budgeting, you have more money left after the holidays than you thought you would. If you make an annual contribution before April 15 of this year, you can choose to apply that contribution to 2009 and reap the tax benefits. If you are under 50 years old, you can contribute up to $5,000 for 2009. If you are 50 or over, you can contribute up to $6,000.
Funds are put into a Traditional IRA on a pre-tax basis, so it will reduce your taxable income for the year. For example, let’s assume that you are under 50 and your annual compensation is $80,000. If you contribute $5,000 before April 15, 2010, you reduce your taxable income to $75,000 for your 2009 taxes. Depending on your personal financial situation, this type of contribution could put you in a lower tax bracket and thus save you money this April. Do you have a spouse who does not work outside the home? If so, your spouse might be able to open a Traditional IRA and make an annual contribution that will also apply for 2009.
When you meet with your tax advisor, don’t forget to ask about how opening an IRA or making contributions to an existing IRA can help you today and in the future.
By Jennifer Williams, Business Developement Manager
JWilliams@theentrustgroup.com