It’s that time of the year again – tax season! But fear not, dear taxpayers, because we’re here to break down some important information for you. Grab your favorite beverage, sit back, and let’s chat about IRA contributions, and salary deferrals

Get Those IRA Contributions In By April 18

The 2022 tax deadline is April 18, 2023. This year, you’ve got an extra three days to file your Form 1040 or request an extension (score!). But don’t forget, you also have until April 18 to contribute up to $6,000 (or $7,000 if you’re age 50 or over) to your traditional or Roth IRA for 2022. Just a heads up: requesting an extension to file your Form 1040 doesn’t extend the deadline for your IRA contributions.

And guess what? If you’re a low-to-moderate-income taxpayer, you might be eligible for a Saver’s Credit of up to 50% for contributions made to IRAs and certain retirement plans. Your maximum credit is $1,000 ($2,000 if married filing jointly), but it won’t exceed your income tax liability.

Over-contributed to Your Retirement Plans? No Worries, Just Fix It by April 15

For 2022, the total amount you can contribute to various retirement plans (think 401(k), 403(b), SARSEP, and SIMPLE IRA plans) is limited to $20,500 (plus an extra $6,500 if you’re age 50 or over). If you accidentally over-contributed, don’t panic! You can take a corrective distribution of the excess deferral amount, plus earnings, by April 15, 2023. We’ve listed the tax implications for you below:

Withdrawn by April 15:

• Excess is taxed in the calendar year deferred
• Earnings are taxed in the year distributed
• Not subject to 10% early distribution tax, 20% withholding, or spousal consent

Not withdrawn by April 15:

• Excess deferral is taxed in the calendar year deferred and the year distributed
• Earnings are taxed in the year distributed
• May be subject to 10% early distribution tax, 20% withholding, and spousal consent

Remember, if you contributed to two or more retirement plans with different employers in 2022, you’ll want to double-check that you haven’t exceeded the deferral limit. The Interactive Tax Assistant can help you determine how to correct excess salary deferrals.