With tax season well under way, you may be wondering how your IRA figures into your filing. There are several key deadlines with respect to IRA accounts that you must consider before beginning your taxes. For the purpose of this article, we will only be focusing on traditional IRAs, Roth IRAs, and inherited IRAs.
- December 31st. If you were thinking about converting your traditional IRA to a Roth IRA, the transfer must be complete by the end of the year. The end of December also marks when you must take your Required Minimum Distribution (RMD) from your traditional IRA if you are older than 70 ½, or from your inherited IRA no matter how old you are. Roth IRAs don’t necessitate RMDs.
An inherited IRA requires that you take your first RMD by December 31st the year after the year of the original account holder’s death, and then calculate RMDs based on your own life expectancy, or you will default to the five year plan which will distribute all funds by December 31st on the fifth year following death. If the original account holder was already older than 70 ½ at the time of death, you must ensure they took their yearly RMD before the close of that year. If RMDs are forgotten, significant penalties will occur, and you could owe up to 50% of that RMD to the IRS. Remember, any distributions from a traditional IRA count as taxable income and may move you to a higher tax bracket.
- January 31st. This is the date when you will typically receive your 1099 forms by and will help you file your taxes correctly. You should receive 1099 forms from your place of employment as well as all other sources of income, including your retirement accounts if you recognized a gain in that year.
- April 17th. This is usually the last day you can make a contribution to your traditional or Roth IRA for it to count in the tax year. The maximum contribution amount for both Traditional and Roth IRAs for 2017 is $5,500, or $6,500 if you’re older than 50.
- April 18th. Tax day—deadline for filing taxes for individuals, sole proprietors, and many corporations. Not filing taxes can result in penalties for every month you don’t file after this date. If you owe on your taxes, you must also pay by this date. If you cannot pay the full amount, you will also be penalized for every month you don’t pay. Combined, you could end up paying 5% more each month on the amount you still owe. However, there are a few payment plan options allowed by the IRS for qualified individuals.
- October 16th. If you qualified for a tax filing extension, your taxes will be due by this day. No more extensions will be granted past this date.
The above deadlines may vary state to state or by company, but usually fall within a day or two of the above listed. Be sure to check with your tax advisor about specific dates that apply to you and how to maximize your earnings this year.