With the tax filing deadline just 2 weeks away, the time for elaborate tax planning has passed. After all, filing taxes is merely a recording of financial history—what you did in 2024. But don’t be fooled into thinking there’s nothing left to do. In fact, there’s one last-minute move that could generate tax savings.
The IRA Contribution: A Tax-Saving Trick That’s No Joke
You still have time to contribute to a Traditional IRA and potentially deduct it on your 2024 tax return. But that contribution must be made by April 15, 2025, and be applied to your 2024 contribution. It’s a win-win: you save for retirement while reducing your taxable income for the prior year.
For 2024, you can contribute up to $7,000 to an IRA ($8,000 if you’re age 50 or older). If you’re married, your spouse can contribute as well, potentially doubling the tax benefit. However, be aware that income limits apply, especially if you (or your spouse) have a retirement plan through work. The tax benefit? Your contribution lowers your adjusted gross income (AGI)—which could also improve eligibility for other tax credits and deductions.
A Roth IRA is another option, but contributions are made with after-tax dollars, meaning no immediate deduction. The trade-off? Your withdrawals—including earnings—are tax-free in retirement. But beware of income limits: in 2024, eligibility phases out at $161,000 for single filers and $240,000 for married filing jointly. If your income is too high, consider the “backdoor Roth IRA” strategy (but consult a professional first, as tax rules can be tricky).
Should You Convert to a Roth IRA Now?
Speaking of Roth IRAs, some taxpayers are considering a Roth conversion before tax rates rise in 2026 (when the current tax laws are set to expire). This involves transferring money from a Traditional IRA to a Roth IRA and paying taxes on the conversion now. The benefit? Once the money is in the Roth, it grows tax-free, and future withdrawals won’t be taxed. If you expect to be in a higher tax bracket later, this could be a smart move.
The “Tax Filing Shuffle”—Avoid Common Last-Minute Mistakes
As the deadline nears, don’t let the rush lead to costly errors. Here are a few pitfalls to avoid:
⦁ Direct Deposit Disasters: Double-check your bank routing and account numbers before e-filing. Sending your refund to the wrong account is no laughing matter!
⦁ Missing Deductions & Credits: Did you claim education credits, energy-efficient home improvements, or the self-employed health insurance deduction? Don’t leave money on the table.
⦁ Forgotten Quarterly Payments: If you’re self-employed and haven’t made estimated tax payments, brace yourself—penalties may apply. Consider setting up automatic payments for 2025.
⦁ Procrastination Panic: If you need more time, file Form 4868 for an extension. But remember, this only extends the deadline to file—not to pay. If you owe taxes, pay what you can by April 15 to avoid penalties and interest.
Foolproof Tax Planning for the Future
While last-minute moves can help, the best way to maximize savings is through year-round tax planning. Consider a tax-sensitive asset allocation strategy, ensuring that your investments are positioned wisely:
⦁ Tax-Deferred Accounts: Traditional IRAs, 401(k)s, pensions
⦁ Taxable Accounts: Bank savings, brokerage accounts, rental income
⦁ Tax-Free Accounts: Roth IRAs, HSAs, FSAs, cash-value life insurance
By proactively managing where and how your money is taxed, you can optimize your financial future and minimize surprises.
No Fooling—Tax Pros Can Help
If your tax situation is complex or you’re unsure about the best last-minute moves, consulting a tax professional is a smart strategy. The tax code isn’t known for its simplicity, and one wrong move can lead to penalties—or worse, an unexpected audit letter.
So, while April 1st is a day for pranks, your taxes are no joke. Take advantage of the remaining opportunities, double-check your filing, and set yourself up for smoother tax seasons ahead!
For ease of tax preparation or to file an extension, contact Saunders Tax & Accounting at www.SaundersTax.com or call us at 301-714-2071. Open Monday – Friday 9 am to 9 pm and Saturdays 9 am to 3 pm. Awarded the Hagerstown Chamber of Commerce “2023 Small Business of the Year” and Hagerstown Hotlist 2024, we have been providing a Less Taxing Life and More Prosperous Solutions since 1984!
