Free Tax Tip #5: Maximize Retirement Account Tax Savings
by Barry Steiner CPA (Former IRS agent)
Managing a tax burden has never been more difficult, whether you're managing your individual tax rates, the rates on your investments, the taxes on your privately held or pass-through business, or the income of executives and shareholders at your company. Lawmakers have been aggressively using the tax code to try to get the economy back on track, and there are now more ways than ever to reduce your tax liability – however, all of them take planning.
5. Maximize retirement account tax savings
Be sure to maximize your contributions to a retirement account. Traditional retirement accounts like 401(k)s and IRAs offer some of the best tax savings available. Your contributions reduce taxable income at the time you make them, and you don't pay taxes until you take the money out. The 2011 contribution limits are $16,500 for a 401(k) and $5,000 for an IRA (not including catch-up contributions for those 50 and older). Tax tip: 2011 contributions to your IRA can be made as late as April 15, 2012.
Your Weekly Tax Jokes
"The House passed a bill where there's a tax now of 90% on the bonuses that these people get. So, half the Republicans voted against this. They said this is exactly the kind of punitive taxation that's going to drive good people out of the fraud business." - Bill Maher
"As part of a plan to close his state's budget deficit, New York Governor David Paterson is proposing a tax on Internet pornography. You see, this is why we can't have blind governors, I mean, no offense, but of course he's going to tax pornography. If he can't enjoy it, nobody can. What's next, a tax on rainbows?" - Jimmy Kimmel
"And there are a lot of new taxes coming. California state legislators want to solve our state's giant deficit by taxing marijuana. Meanwhile, Oregon wants to increase a tax on beer, while New York wants to tax Internet porn. You know what this means? By the end of spring break, this whole thing could be paid for." - Jay Leno
"Another one of President Barack Obama's nominees is having tax issues, which proves one thing: The Democrats like raising the taxes, but they hate paying them." - Craig Ferguson
Click here to see previous Tax Tips from Barry R. Steiner. Check back next Wednesday for another free tax tip – one tip for each week of the tax season until April 17th.
Barry R. Steiner is a Chicago-based CPA and former IRS Agent. He's the author of the best-selling income tax guide "Pay Less Tax Legally" and was a regularly featured guest on ABC-TV's "Good Morning America". Barry has maintained his own tax practice for the past 40 years, and most recently has authored two e-books: "Infernal Residue" and "Kiss My IRS". More info at KissMyIRS.com »
