April 17, 2020

Take advantage of this smart way to save money on taxes, says CPA — you have until July 15

Originally posted here.

This week normally would be the deadline to file your federal taxes, but because of the coronavirus pandemic, this year you have until July 15 to file and pay your federal income taxes.

There’s an added bonus to this extension: You also have until that deadline to contribute to an IRA for the 2019 tax year. Making those prior-year contributions up until tax day is a perk that one-quarter of Americans didn’t know was legal in the first place, according to a 2019 NerdWallet survey of over 2,000 U.S. adults.

IRAs, or individual retirement accounts, are a tax-advantaged way to save for the future in addition to or in lieu of a workplace retirement plan like a 401(k). Adding money to these accounts can be a smart (and legal) way to reduce your tax bill.

“Making IRA contributions is like going to the airport. The responsible thing to do is get there early with plenty of time to spare,” explains Matt Rosenberg, a certified public accountant and member of the American Institute of CPAs Financial Literacy Commission. Looking at it that way, he says, the extended deadline until mid-July is “like showing up late for your flight and finding it delayed. It’s an unexpected break that should definitely be taken advantage of.”

Here’s what you need to know about this change.