If New Year's Eve has come and gone, so has your chance to take advantage of most tax breaks for the prior year. But don't lose hope: Contributions to your individual retirement arrangement -- deductible from your income for the previous year -- are still possible because the deadline isn't the end of the calendar year.
The funding deadline for your IRA isn't until your tax filing deadline in April -- typically April 15. So, since the 2012 tax filing deadline for 2012 isn't until April 15, 2013, you can make your 2012 IRA contribution up to that date. But, if you get an an extension to file your tax return, the extension doesn't push back the deadline for contributing to your IRA.
Benefits of Waiting
Contributing as early as possible lets the money start growing tax-free sooner. But, in some cases it might be to your advantage to wait until after the end of the calendar year to make your IRA contribution. For example, if you're hoping to contribute to a Roth IRA but you think your income might be too high, you can wait until the end of the year. That way, you know for sure what your income is so you don't accidentally contribute when you're ineligible. Similarly, if you're covered by an employer plan, like a 401(k), you can't deduct your traditional IRA contributions if your income is too high. So, waiting until you know exactly what your income is lets you avoid being stuck with a nondeductible contribution.
The IRS rules let you file your return, including any IRA deductions or credits, before you make your IRA contribution. Still, you must make the contribution by your tax filing deadline. If you file early enough, you could even get your tax refund in time to use it for the contribution. For example, the IRS estimates that 90 percent of refunds are issued within 21 days. So, if you file your tax return in January or February, you're very likely to get your tax refund in plenty of time to deposit it in your IRA by April 15.
Contributions made between Jan. 1 and April 15 can count for either the prior year or the current year. To make things simpler for financial institutions, the IRS allows them to assume that every contribution is made for the calendar year in which it is received unless otherwise noted. For example, if you make an IRA contribution on April 1, 2013, your bank will assume that it's for the 2013 tax year. So, make it clear that the contribution is for the prior tax year.
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