Save taxes by saving for retirement

There is still time to make tax planning decisions for 2009. Taxpayers can reduce their 2009 tax bill by taking timely action on retirement plan and IRA contributions. Your WK adviser can help you evaluate whether any of the following planning ideas might save you money.

Contribute to an IRA. The deadline for IRA contributions that can be deducted against your 2009 income is April 15, 2010. Not all taxpayers are eligible to make deductible IRA contributions; your WK adviser can help you to determine whether you might qualify.

Undo a Roth conversion. Some taxpayers who decided to convert to a Roth IRA may wish to reverse the transaction if, for example, the IRA has since declined in value or the taxpayer expects to be in a lower tax bracket in 2010. This is called a "recharacterization." For 2009 conversions, it is best accomplished by having the IRA trustee directly transfer the account assets to a traditional IRA by April 15, 2010. This deadline can be extended to October 15, 2010, by requesting an automatic extension for the 2009 return.

Did I say Roth? The same rules that allow a taxpayer to undo a Roth conversion also allow him or her to turn a Roth contribution into a traditional contribution. This may be more beneficial if you find the current tax deduction is worth more than you originally thought, based upon your 2009 tax bracket.

Shelter self-employment income. If you received self-employment income during 2009, you might be able to save income taxes by making a deductible retirement plan contribution. Even if you neglected to establish a plan before December 31, 2009, certain taxpayers can establish a simplified employee pension (SEP) as late as April 15, 2010, or October 15 if the 2009 return is extended.

CONTACT US

To discuss these and other tax planning ideas, please contact your WK adviser at (573) 442-6171 or (573) 635-6196. Time to take advantage of 2009 tax planning opportunities will soon run out.

Click here to view the article in PDF format.

Back to News page

Columbia, MO (573) 442-6171  |  Jefferson City, MO (573) 635-6196  |  information@williamskeepers.com

Member, PKF North American Network  |  Copyright © 2008 Williams-Keepers LLC