2012 has come and gone… unless you’re talking about contributing to your retirement accounts. Although the IRS’s deadline for things like drawing a salary or donating to a charity is December 31, Uncle Sam is a bit of a procrastinator when it comes to funding your IRA. For this section of your tax return, the federal government gives you until April 15th.

Say December 31 came and went, and you’ve only contributed $2,500 to your traditional IRA. “Oh well,” you think to yourself, realizing your contributions only amounted to half the legal limit, “I’ll try to do better next year.” No! Don’t wait for next year! You can continue to fund your IRA for the 2012 tax year up until Tax Day.

What if you’re the type who likes to have their taxes done early, but won’t have the extra cash to make that IRA contribution until closer to April 15? Don’t worry; the IRS allows you to file your return on which the contribution is claimed, even if you’ve yet to make it. Just don’t call the IRS’s bluff – if you claim the contribution, you better be sure you’ll be able to follow through.

You’ll also want to clarify your IRA contribution with your brokerage. For example, if you send over a $500 contribution without stipulation for which tax year it should be filed under, it will be up to your brokerage to categorize it – and most likely, they’re going to tally it up under the current tax year. You need to specifically state which tax year the contribution should be counted toward.

How can funding your IRA right down to the deadline help you out? In many ways, it’s the poor man’s tax shelter. Say your 2012 taxable earnings total $40,000. If you’re single, you’d be looking at the following taxes (not including other deductions):

10% on the first $8,700, or $870


15% on all income between $8,701 – $35,350, or $3997.35


25% on the $4650 you made over $35,350, or $1162.50

Under this example, your total tax bill would be $6029.85. But if you made a $5,000 contribution to you traditional IRA at the last minute (assuming you hadn’t made any contributions up to that point), you’d be able to knock yourself out of the 25% tax bracket entirely. In fact, you’d bring your overall tax burden down from more than $6000 to just $4814.85. That’s a difference of more than $1200!

Do you make contributions to your IRA right up to the IRS deadline? Why or why not?

Libby Balke

Libby Balke