By now most of the year-end tax planning opportunities have come and gone. However, there are a few opportunities left to reduce your 2007 taxable income. One of these is to open and make a contribution to a traditional Individual Retirement Account before April 15, 2008. A married couple may be able to defer $10,000 in taxable income.
For 2007, an individual who is under age 70 1/2 may be able to deduct contributions to a traditional IRA account up to$4,000; if you are age 50 years or older by the end of the year, then you can make an additional “catch-up” contribution of $1,000. If you are married and file jointly, you may each contribute up to $4,000 ($5,000 if age 50 or older) to an IRA as long as your combined earned income covers the contributions.
This contribution may be limited if your employer offered participation in a qualified retirement plan. If box 13 on your W-2 has an ‘X’ then this would indicate that you are covered by an employer retirement plan and deemed to be an “Active Participant”.
An active participant still may be able to deduct the full $4,000 ($5,000 if age 50 or older) contribution. For active participants deductibility of IRA contributions phases out as your modified adjusted gross income is in excess of a specific amount. The amount depends upon your filing status. The rules get complex, before you open an IRA or make contributions please call me to ensure that all requirements are met.
Organize Your Tax Records — Organizing your tax records and paperwork early gives you time to request copies of any missing documents and makes it less likely that you will miss valuable deductions when you file your 2007 tax return. Our tax organizer will help you identify the documents you need and highlight areas that may offer other tax-savings opportunities.
Please contact me with any questions or concerns you may have related to tax or accounting questions. For more information, please call 661-253-0270 or e-mail info@chegwin.com .
In accordance with IRS Circular 230, the information in this article is not intended or written to be used, and cannot be used as or considered a “covered opinion” or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.