A few extra days to make 2011 IRA decisions

With the tax return deadline rapidly approaching, you still have time to make a 2011 contribution to an IRA.

While you might choose to contribute to a Roth IRA because of the future tax savings available, a contribution to a traditional IRA may entitle you to an immediate tax deduction.

This year you have a few extra days to make your 2011 IRA contribution. Emancipation Day, a legal holiday in the District of Columbia, is Monday, April 16, 2012, which moves the due date for filing your tax return and contributing to your 2011 IRA to Tuesday, April 17, 2012.

Here are a few additional facts you should know about setting aside retirement money in an IRA:

1. You may be able to deduct some or all of your contributions to your traditional IRA. Those with lower income may also be eligible for the Saver's Credit, which can range as high as $1,000 depending upon your income and the amount you contribute.

2. Contributions can be made to your 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 contributions for 2011 must be made by April 17, 2012. If you contribute between Jan. 1 and April 17, you should designate whether the contribution relates to 2011 or 2012.

3. The funds in your IRA are generally not taxed until you receive distributions from that IRA. With a Roth IRA, distributions generally escape tax entirely.

4. For 2011, the most that you can contribute to all of your IRAs is generally the smaller of the following amounts: $5,000 ($6,000 if you were age 50 or older at the end of 2011) or the amount of your earned income for the year. Similar limits apply for 2012 contributions.

5. You must be under age 70 1/2 at the end of the tax year to contribute to a traditional IRA. There is no age limit on contributions to a Roth IRA.

6. You must have earned income, such as wages, salaries, commissions, tips, bonuses or net income from self-employment, to contribute to an IRA. If you file a joint return, generally only one of you needs to have earned income.

7. While most people wait until the last minute to make their IRA contributions, it is more advantageous to make your contribution as early in the year as possible to maximize the tax-advantaged earnings characteristic of these accounts.

Refer to IRS Publication 590, Individual Retirement Arrangements, for more information on contributing to your IRA account.

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