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IRA Contribution Deadline Fast Approaching
MADISON, Wis. (3/27/13)--The federal tax filing deadline is right around the corner and, while it may be too late to take advantage of many 2012 tax-saving strategies, there still is time to save with an Individual Retirement Account for 2012--if you act soon.

You have until April 15 to make a 2012 IRA contribution. Doing so will bring you one step closer to a more secure retirement--and you might even receive a tax deduction or a tax credit for making your contribution.

"Even if you cannot make the full IRA contribution, take a tax deduction, or receive a tax credit for your contribution, you still may want to consider making an IRA contribution, no matter what the dollar amount," according to Dennis Zuehlke, compliance manager for Ascensus in Middleton, Wis. The company provides retirement plan services to financial organizations nationwide.

"Americans' confidence in their ability to retire comfortably is at historically low levels, so any contribution to an IRA, regardless of the amount, is better than none at all," Zuehlke added.

You can contribute to a traditional IRA if you are younger than age 70½ and have earned income. You can contribute to a Roth IRA regardless of your age, provided that you have earned income and your modified adjusted gross income (MAGI) for 2012 is less than $125,000 if single, or $183,000 if married filing a joint tax return.

The 2012 IRA contribution limit is $5,000. If you reached age 50 by the end of 2012, you can make an additional catch-up contribution of $1,000, for a total contribution of $6,000. However, if your earned income for 2012 is less than $5,000 (or $6,000 if age 50 or older), then the amount of your contribution cannot exceed your total earned income.

If you contribute to a traditional IRA, all or part of your contribution may be tax-deductible. Whether your contribution or a portion of your contribution is deductible depends on whether you are an active participant in an employer-sponsored retirement plan, your marital status, and your MAGI. If both you and your spouse are not active participants in an employer-sponsored retirement plan, then your entire contribution is tax-deductible. If either you or your spouse is an active participant, then you may not be able to deduct the full amount of your IRA contribution, depending on your filing status and MAGI.

With a Roth IRA, contributions are never deductible. But all qualified distributions and even some nonqualified distributions from a Roth IRA may be taken tax-free.

Regardless of whether you contribute to a traditional IRA or Roth IRA, you may be eligible for a tax credit. The saver's tax credit is a nonrefundable credit to help offset the cost of the first $2,000 contributed to a traditional or Roth IRA. To be eligible for the credit, you must have reached age 18 before the end of 2012, not be a full-time student or dependent, and have an adjusted gross income (AGI) within certain limits. For 2012, single filers with an AGI of less than $28,750 ($43,125 for head of household filers, $57,500 for joint filers) are eligible for a credit of 10%, 20%, or 50% of the first $2,000 of their traditional or Roth IRA contribution. This credit is in addition to any tax deduction for making a traditional IRA contribution.
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