The IRS has announced that the extension of the 2019 federal tax filing deadline to July 15, 2020, also applies to individual contributions to traditional IRAs and solo 401(k)s.
Due to the fallout from the spread of COVID-19, the IRS is giving taxpayers an additional 90 days to contribute to these plans and apply the tax benefits to reduce their federal income tax liabilities for 2019. Considering that the public equity markets are off from last year’s record highs, individuals who make these contributions in the next few months can reduce their tax bills for last year and take advantage of future market appreciation and tax-deferred earnings growth. Individuals facing liquidity and cash flow challenges in the current environment should speak with their financial advisors to help identify the financial resources to make these contributions.
For 2019, the maximum amount individuals may contribute to a traditional IRA is $6,000, or $7,000 when the taxpayer is age 50 or older. Contributions may be tax-deductible, depending on the taxpayer’s, income, filing status and coverage by a workplace retirement plan. Assets grow tax-free but are subject to tax when taken as distributions in retirement.
Self-employed taxpayers can contribute up to $56,000 to solo 401(k)s for themselves and a spouse for the 2019 tax year, or $62,000 for business owners and their spouses who are age 50 and older.
About the Author: Sean Deviney is a CFP®* professional, a retirement plan advisor and a director with Provenance Wealth Advisors (PWA), an independent financial services firm affiliated with Berkowitz Pollack Brant Advisors + CPAs. For more information, call (954) 712-8888 or email firstname.lastname@example.org.
Provenance Wealth Advisors, 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.
Sean Deviney is a registered representative of and offers securities through Raymond James Financial Services, Inc., Member FINRA/SIPC. Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors and Accountants. PWA is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of PWA and not necessarily those of Raymond James. The information contained in this report has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Please note that changes in tax laws may occur at any time and may have a substantial impact on each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.
401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Investments mentioned may not be suitable for all investors. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
* Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.