The Internal Revenue Service (IRS) announced that the Federal tax cutoff date has been extended from April 15, 2021 to May 17, 2021. In addition, it has been confirmed that the deadline to contribute to individual retirement accounts and health savings accounts has also been extended to reflect the May 17th cutoff date.
Considering this recent announcement, here are a few additional facts regarding IRA contributions that may be helpful to note:
- Traditional IRA owners can now contribute to their IRAs, even after the age of 70 ½ years old. They must still have earned income to be eligible to contribute to their Roth IRA or their Traditional IRA. Social security is not considered earned income for eligibility for IRA contributions. For any questions concerning eligible earned income to contribute to an IRA, please consult a tax accountant. This was updated in December of 2019 with the Setting Every Community Up for Retirement Enhancement (SECURE) Act.
- The maximum amount that can be contributed to a Roth IRA or a Traditional IRA for the tax year of 2020 is $6,000. A person turning 50 years old, or older, in 2020 becomes eligible to make an additional catch-up contribution up to $1000. To contribute the maximum amount, you need at least that much in earned income.
- Also updated in December of 2019, within the SECURE Act, was the age for Required Minimum Distributions (RMD). Those that are 72 years old, or older, in 2021 are in RMD status and are required to claim their RMD amount in 2021. If the amount is not claimed then that person will be penalized by the IRS, 50 percent of the amount not distributed. It is important to note that Roth IRAs do not have a RMD.