Roth IRA and Filing Taxes

[parafly]

Hello All,

I have a quick question regarding Roth IRA's and filing taxes. I usually file my own taxes using Turbo Tax, and I was wondering whether opening a Roth IRA had any effect on the data put on the tax return.

More specifically, I have already filed my taxes for 2007. Can I still open and max out a Roth IRA for 2007 before April 15? Would it "mess up" my already filed taxes in any way?

Thanks in advance.

[sweeps]

I was wondering the same thing. And the answer is reporting Roth IRA contributions is not required by the IRS. So you can file your taxes now and still make your 2007 contribution later.

17.3 Individual Retirement Arrangements (IRAs): Roth IRA

Do I report my nondeductible Roth IRA contributions on Form 8606?

There are no forms to report a Roth contribution. The financial institution, which is the trustee of your Roth IRA, will send you information on the amount in your Roth IRA. They will also send the information to the Internal Revenue Service. Use Form 8606 (PDF), Nondeductible IRAs, if you made a nondeductible contribution to a traditional IRA; converted from a traditional IRA, a SEP, or Simple IRA to a Roth IRA, received a distribution from a traditional IRA, a SEP, or a Simple IRA and made nondeductible contributions to a traditional IRA, or received a distribution from a Roth or traditional IRA.

Source

Also:

Tax-Filing Requirements
Roth IRA participant contributions are not required to be reported on the individual's income tax return. However, the IRA holder may be required to report Roth IRA conversions, recharacterizations and distributions on his or her tax return.

Source

[kilapapipa]

Sorry for the hijack here. How much will the tax come down on a typical 100K income if you put 2-4K in a Roth?

[sweeps]

Sorry for the hijack here. How much will the tax come down on a typical 100K income if you put 2-4K in a Roth?

Zero. A Roth IRA does not lower your taxable income like a Traditional IRA or pre-tax 401k does. Instead you're paying taxes now so you won't have to pay them later.

[parafly]

Why does the financial institution send your Roth IRA info to the IRS if there are no tax implications involved?

Is it simply to allow the IRS to track whether you meet the requirements of a Roth and haven't gone over the annual contribution limit?

[kilapapipa]

Zero. A Roth IRA does not lower your taxable income like a Traditional IRA or pre-tax 401k does. Instead you're paying taxes now so you won't have to pay them later.

Thanks, so what can I open to possibly reduce my tax liability for 2007?

[sweeps]

Thanks, so what can I open to possibly reduce my tax liability for 2007?

If your income is $100K, you're probably not eligible for a deductible traditional IRA. You can check here. Do you own a business? A SEP IRA is an option.

[maat55]

Can anyone explain the Retirement Savings Credit to me please?

[atomicrc11]

The retirement savings credit is a program that the federal government matches a percentage of the amount you put into a qualified retirement plan and you get it back as a tax credit. The income limits are quite low and the maximum credit and percentage is dependent on your income. If you make over 25k single, 37.5k head of household or 50k married you get no credit.

[maat55]

atomicrc11

Thanks for the imfo, this is new to me.

[dardhel]

I have taken advantage of the Retirement Savings Contribution Credit (RSCC) quite a few years. I love tax credits...

[Snave]

Thanks, so what can I open to possibly reduce my tax liability for 2007?

I think this is correct. You can reduce your 2007 tax liability by contributing to a traditional IRA after January 1st, 2008 that is marked for 2007 as long as you meet the requirements. Your 401K and your traditional IRA need to be under the $15,500 limit. If you maxed your 401K out to this limit in 2007, then you can't put any more money in a traditional IRA and get a tax break.