Why You Should Make Your IRA Contribution Now


Editor’s Note: This article is part of our 2012 Tax Tips series. Robert Flach is an expert with almost 40 years as a tax professional and also blogs as The Wandering Tax Pro.

NEW YORK (MainStreet) – If you think it’s too early to make your 2012 IRA contribution, think again.

Yes, I did say your 2012 contribution, and yes, I do know that you have until April 15, 2013 to make that contribution. But if you are planning to contribute to a traditional or Roth IRA, a Coverdell Education Savings Account, a Section 529 College Savings Plan, or a Health Savings Account for 2012, don't put it off until the last minute. 

By making your contribution for the year early in January, you will have substantially more in the account by the time you are ready to retire or when you need the money to pay for education or medical bills than you would if you wait until the statutory deadline for having the contribution be part of your previous year’s taxes.

If you make a Roth contribution today and later discover that you are not eligible for a Roth for 2012, or for whatever reason decide that you would rather have the funds in a traditional IRA, you have until the due date of your 2012 tax return, including extensions (as late as Oct. 15, 2013) to "recharacterize" your contribution.

When putting in your retirement cash, be sure to clearly identify the tax year, such as 2012, on the check and on any payment coupon or voucher. You should also make sure to check that the right year is identified when you receive your next account statement.

Stay up-to-date on federal taxes by paying a regular visit to MainStreet’s Tax Center.

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