Be aware of these four IRA rules

If you have an individual retirement account, you’re aware of how complicated the rules can get. Here are four to remember as you prepare your 2015 federal income tax return. Read more.

If you have an individual retirement account, you’re aware of how complicated the rules can get. Here are four to remember as you prepare your 2015 federal income tax return.

  1. Are you searching for one more tax deduction? It’s not too late to contribute to your IRA and claim a deduction for 2015. Under current tax rules, you can establish and contribute to your IRA up until April 18, 2016 (April 19 if you live in Maine or Massachusetts). If the IRA is the traditional, tax-deductible kind, you can deduct that contribution on your 2015 federal income tax return. If you’re under age 50, the maximum contribution is $5,500. If you were 50 or older by December 31, 2015, you can contribute up to $6,500.
  2. You can make a contribution to a traditional IRA and convert it to a Roth later. Although a conversion now will generate taxable income that’s reportable on next year’s federal tax return, qualifying withdrawals from the Roth will be tax-free when you retire. If your circumstances change, you can choose to “recharacterize” your new Roth as a traditional IRA by moving the funds back within a specified period. You also have the opportunity to “reconvert” the funds to a Roth again after a recharacterization.
  3. If you turned 70½ in 2015, you’re now required to take an annual minimum distribution from your IRA (and, unless you’re still working, from other retirement plans also). If you chose to delay taking your first distribution last year, April 1, 2016, is an important deadline. That’s the last day you have to take your initial distribution or you’ll be subject to a 50% penalty on the amount you should have taken.
  4. The age of 70½ also lets you benefit from the now-permanent tax break for making charitable contributions from your IRAs. While it’s too late to make a contribution for 2015, you can exclude direct transfers of up to $100,000 from your gross income this year. The donation counts as part of your required minimum distribution.

For more tax breaks related to IRAs and other retirement plans, contact our office.

About Brenda J. McGivern, CPA

Brenda McGivern started her own certified public accounting and management consulting firm in October 2001. The full service CPA firm provides tax and accounting solutions to meet the needs of today's small business and individual. Brenda McGivern has become a trusted advisor and valuable resource her clients rely on for timely, accurate assistance when they need it. Before starting the firm, she worked as an accountant for three years at a local firm and prior to that five years at a large international CPA firm in Boston. She has performed the following tax services: federal, state and local tax planning, international tax planning, estate and succession planning, mergers and acquisitions, capital retention and IRS representation. She has also coordinated assurance engagements, such as financial statement audits, reviews and compilations from the planning phase through the reporting phase. She has prepared and reviewed regulatory filings for numerous regulatory agencies including the Security and Exchange Commission. Prior to these positions she was selected from over 2,000 candidates into an eight-person intensive financial management program at an international technology company. The program consisted of graduate level classroom study and two six-month rotational assignments in financial operations. She graduated cum laude from the University of Massachusetts at Amherst and holds a Bachelors Degree in Business Administration with a concentration in accounting. McGivern also holds a license in Massachusetts as a Certified Public Accountant and is a member of the American Society of Certified Public Accountants and the Massachusetts Society of Certified Public Accountants. She resides in Stoughton, Massachusetts with her husband Brian, and their sons Sean, Ryan and Conor and their dog, Davis.
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2 Responses to Be aware of these four IRA rules

  1. Thanks for sharing this really useful information!

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