News & Announcements

2013 Individual Retirement Account Year-End Reminders

December 3, 2013

Contribution Limits
You can contribute up to $5,500 or your taxable compensation, whichever is less, to a traditional or Roth IRA (or some combination of the two). If you are age 50 or older by the end of 2013, this limit is increased to $6,500. However, you may not be able to take a deduction on your tax return for your traditional IRA contributions if you, or your spouse, are covered by a retirement plan at work and your income is above a certain level. If you file a joint return, you and your spouse can both make IRA contributions, even if only one of you has taxable compensation. In this case the spouse with the taxable compensation will need to make what is called a spousal IRA contribution. You have until April 15, 2014, to make an IRA contribution for 2013.

Excess Contributions
If you have exceeded the 2013 IRA contribution limit, you should withdraw the excess contributions from your account by the due date of your 2013 tax return (including extensions). Otherwise, you must pay a 6 percent tax each year on the excess amounts remaining in your account.

Tax Credit
You may be able to take a retirement savings contribution tax credit (saver’s credit) of up to $1,000 ($2,000 if filing jointly) for your contributions to either a traditional or Roth IRA. The amount of the credit you can get is based on the contributions you make and your credit rate. Your credit rate can be as low as 10 percent or as high as 50 percent. Your credit rate depends on your income and your filing status.

Required Minimum Distributions
If you are 70 1/2 or older, you must take a required minimum distribution from your traditional IRA by December 31, 2013 (April 1, 2014, if you turned 70 1/2 in 2013). You can calculate the amount of your RMD by using the RMD worksheets. You must calculate the RMD separately for each of your traditional IRAs, but can withdraw the total amount from one or more of them. There is a 50 percent excise tax assessed for each year that you do not take your RMD on time. Once you discover that you missed your RMD, you need to take corrective action to distribute the required amount as soon as possible. If you own only Roth IRAs, you don’t have to worry about RMDs because you are not required to take RMDs from Roth IRAs held in your name.

Charitable Donations From Your IRA
You can exclude from gross income, up to $100,000 of withdrawals from your IRA in 2013 that were directed to a qualified charitable distribution, provided: 1. the distribution was paid directly to the charity from your IRA (not an ongoing SEP or SIMPLE IRA), 2. the charity is a qualified charity, 3. you are at least 70 ½ years old, and 4. the distribution was made by December 31, 2013.

You can use a qualified charitable distribution to satisfy the RMD for your IRA for the year. However, you can’t deduct this amount as a charitable contribution on your tax return.

See the attached link to the IRS website for more information.


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