The Top 4 Year-End IRA Reminders

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We all know that IRAs are a key way to save for retirement. If you have an IRA or are thinking about opening one, you need to know four year-end rules from the IRS.

1. Know the limits. If you file a joint return, your spouse can contribute up to $5,500 (or $6,500 if you are 50 or older) to a traditional or Roth IRA even if only one of you has taxable compensation. Even if both of you have a retirement plan at work, you can still contribute. In some cases, you may need to reduce your deductions accordingly.

2. Avoid excess contributions. If you contribute more than the IRA limits, you are subject to pay a 6% tax on the surplus amount. You can avoid the tax if you withdraw the excess from your account by the end of the year.

3. Take required distributions.  If you’re at least age 70½, you must take a requiredminimum distribution, or RMD, from your traditional IRA. You are not required to take a RMD from your Roth IRA. You normally must take your RMD by Dec. 31, 2014. That deadline is April 1, 2015, if you turned 70½ in 2014. If you have more than one traditional IRA, you figure the RMD separately for each IRA. However, you can withdraw the total amount from one or more of them. If you don’t take your RMD on time you face a 50 percent excise tax on the RMD amount you failed to take out.

4. Claim the saver’s credit.  The formal name of the saver’s credit is the retirement savingscontributions credit. You may qualify for this credit if you contribute to an IRA or retirement plan. This credit will increase your refund. The maximum credit is $1,000 or $2,000 for married couples.