deadline for contributing to previous year IRA

[deca]

I have heard people say that you can contribute to a previous year's IRA as late as April 15th, I have also heard it is as late as when you file your return for the year.

We have not actually filed our return for 2006, we filed an extension and our return is due by August. Can we still contribute to an IRA for 2006 before August?

[momof1in150]

Good try but the deadline is the tax due date of April 17 this year.

You Can Still Make a 2006 IRA Contribution

[MonkeyMama]

For IRAs it is too late - April 15 is the deadline. For businesses and certain self-employed retirement plans the deadline is when you file you return - probably where you heard it. It is a 1/2 truth. But no such luck here.

[deca]

Actually the IRA would be for DH who is self-employed. It would be a SEP-IRA. We haven't set up the account yet but I was wondering if we would be able to set it up for 06 or 07.

[MonkeyMama]

Ah, well why didn't you say so?

You do have until October 15th to set up and fund a SEP for 2006 then. However, be careful. Do not file your tax return until you fund the SEP. As long as you fund the SEP before you file your tax return, you will be okay.

The IRS changed their extension rules in 2006 and there is just one extension to October, so you probably have until 10/15.

Being self-employed is pretty grand when it comes to retirement advantages... Rules are very different from regular IRAs.

[deca]

Actually 25% of his earnings last year is probably less than the cap on a traditional IRA. And there's the whole 15% self-employment tax deal which stinks. And the lack of a health plan or employer-matching on retirement contributions. Self-employment is for the not faint-of-heart. But this year has been going a lot better so it's good to know we can actually contribute for last year now and contribute for 07 maybe later this year or early next.

[MonkeyMama]

Well I should qualify that it is good if you make good money.

Yeah - I agree - I was self-employed and taxed to death for a time and it wasn't my thing.

[deca]

Is a SEP-IRA more like a Roth or more like a traditional IRA? What I mean is, do we defer the tax on contributions now or get tax-free withdrawals later?

[Daylily]

We do a SEP for DH.
To answer your question, you are getting the tax break NOW, so it is more like a traditional RIA.