COVID-19: CHANGES TO CONTRIBUTIONS TO INDIVIDUAL RETIREMENT ARRANGEMENTS (IRAS)
What is an IRA and why contribute to an IRA?
If you and/or your spouse have compensation you could be eligible for an IRA, but there are a lot of restrictions if you or your spouse are covered by an employer retirement plan. The most common contributors to IRAs are self-employed business owners. Contributing to an IRA for a small business owner can be beneficial in multiple ways. Contributing to an IRA can add retirement savings for the small business owner and in most cases is taken as a deduction to lower the owner’s taxable income. The amount you can contribute for the 2019 and 2020 year varies on the type of IRA you set up. There are many types of IRA’s including: Traditional, Roth, SEP (simplified employee pension) and SIMPLE (savings incentive match plan for employees). We can help you decide if an IRA contribution is right for you and what type.
COVID-19 Change to IRA Deadline
Due to COVID-19, the Internal Revenue Service has provided relief for both the Federal income tax filing date and payment date. The Federal income tax filing and payment deadline have been extended from April 15th, 2020 to July 15th, 2020 for the 2019 tax year. Since the Federal deadline has been extended the IRS has also extended the deadline of IRA contributions for the 2019 year to July 15th, 2020 as well. The COVID-19 relief from the IRS is constantly changing and we promise to keep you updated as the information is announced.
What does this mean for you?
For those that usually contribute to an IRA:
- With an extended deadline, you have a few more months to set aside your IRA funds if you had not done so already.
- Your funds are more flexible for right now so you could use the funds to help employees that may be having hardships during this time. Knowing that you have an extra three months to fund your IRA.
For those that have not contributed to an IRA:
- The extension poses an additional three months for small business owners to set up an IRA that may have been unfamiliar with IRAs.
- Once it has been determined which IRA best fits your business, the setup of the account can be done through many different avenues. Those avenues include: Banks, mutual fund companies and some life insurance companies. We can also set you up with the IRA that best fits your needs through our in-house Wealth Management department.
Let us Help you Navigate your IRA Decisions
If you are looking for ways to lower your taxable income, and fit the criteria, it just makes sense to invest your money in yourself through an IRA contribution. Let us help you make the best decision for you, your family and your business.