Contributing to a 401(k) account can be one of the easiest ways to save for retirement. The automatic contributions that go straight from your paycheck to your retirement account not only help to reduce your tax liability but also have the benefit of tax-deferred growth. If contributions need to be made after the tax year ends on Dec. 31, this can be done up to the tax filing deadline with instructions for the funds to be applied to the expired tax year.
Contribution Limits and Deadlines
Contributions can be made to your 401(k) once the tax year ends up to the tax filing deadline. If an extension is filed, contributions can be made up to Oct. 15. The contribution limits for 401(k) accounts adjust each year due to inflation. The maximum amount that you can contribute in 2013 is $17,500. In 2012 it was $17,000. If you exceed the specified amount in contributions, you could be subject to a tax penalty.
Contributing After Dec. 31
There are several reasons why someone would make contributions after the tax year ends. For example, if your 401(k) is established late in the tax year, you are likely to have plenty of margin left for additional contributions after Dec. 31. You may also elect to have contributions marked for the previous tax year if you will benefit more by having the tax deduction in the specified year than in the current year.
Employer-Sponsored Retirement Plans
As you prepare to adjust your contributions and add extra money to your 401(k), it is important to keep in mind that only those contributions made with funds withheld from your wages are tax-deductible. "Even though these employee contributions are not deductible," the IRS notes, "the earnings on them are tax free until distributed in later years." You cannot simply make a contribution from another account. You will likely need to go through your payroll department to make all contribution adjustments.
In order to make a catch-up contribution, you must be age 50 or older. This type of contribution allows an additional $5,500 to contributed be to your 401(k) account. Similar to the normal contribution limits, this catch-up contribution amount can be adjusted based on inflation.
- Stockbyte/Stockbyte/Getty Images
- What Is Needed for Filing Taxes With Dependents?
- What Happens to Monies Forfeited in a Flexible Spending Account?
- How to File Taxes on a New Home
- The Advantage of Filing a Personal Tax Exemption
- Does Amending Taxes Red Flag Them for Audit?
- What Percentage of Federal Taxes Is Withheld From the Check if Filing Single?
- If You Made Less Than $25,000 in One Year, Do You Have to File Taxes?
- 10 Tips You Must Read Before Filing Your Taxes
- Can an IRS Auditor Show Up at Your House Without an Invitation?
- How Do I Find My Employer's State Unemployment Tax Number So I Can File an Unemployment Claim?