Thursday, December 24, 2009

SOME YEAR-END REMINDERS

There are several deadlines for retirement plans, IRAs and Coverdells.

Generally, employer plans must be established by Dec. 31 to get a 2009 deduction. This includes Keoghs. But note the difference for SEPs; you have until the due date for filing your return, plus any extension. That lets you deduct 2009 payments as late as Oct. 15, 2010. There is another alternative for self employed taxpayers that missed the Keogh setup deadline. They still have time to open SEP-IRAs.

The plans have the same deduction amounts, 20% of net self-employment earnings. This is the net profit shown on your Schedule C less one-half of your SECA tax liability.

Regular IRAs must be established by April 15, 2010 for 2009 deductions. Payments are also due by April 15th even if you should extend your return.

Nondeductible payments to IRAs and Roth IRAs are also due by April 15. The same is true for contributions made to Coverdell education savings accounts.

Another reminder… if you have a flexible spending account you must clean it out by December 31st if your employer has not adopted the 2½-month grace period that the IRS now permits. If you don’t spend the money - it is lost.

Also remember to mail checks for deductible items before year-end to ensure a 2009 write-off. You get to claim the deduction this year even if the checks do not clear until January. Make sure you know the rules if you are charging deductible items. For charges that you make with a retail store credit card, you are allowed to claim the deduction for the item only in the tax year in which you pay the bill. For transactions made with a bank credit card, you take the deduction in the tax year that you charged the goods, even though you pay the bill next year.

No comments: