Since I'm a sole proprietor, I have a SEP-IRA.
Yeah, I know Keogh and solo 401(k) plans might offer more advantages, but when I opened it, the SEP-IRA was the way to go, based on both the timing considerations (near the filing deadline) and my contribution amount (pretty small, both from my income standpoint and how much of those paltry earnings I could afford to put into it).
But the main thing about self-employment retirement plans is that they all can help whittle down a tax bill. That's true this year, since my writing jobs paid off a better than I expected.
So after filling out, but not filing, our tax return last week, I mailed my 2007 SEP-IRA contribution. Today when I checked, however, it hadn't yet shown up in my account.
My first thought was to stop the check and head to the bank to wire the contribution.
Then it hit me. The deadline for contributing to a self-employment retirement plan is your filing deadline plus any extensions. This is definitely one time when procrastination is going to pay off.
I was going to e-file our return today, just to beat the Tuesday, April 15, rush. But now, I'll be sending in a Form 4868 instead. That will give me the cushion I need to make sure that my contribution gets there by my now-extended filing deadline.
If it does post in the account today or tomorrow, I'll go ahead and file the 1040 instead of the 4868. But jut in case ….
April 15 ... or later? I also ran across an interesting tidbit in checking not only my SEP-IRA contribution, but also the hubby's IRA account.
The mutual fund company where he has his account told him that they use the postmark on the contribution envelope to determine whether the money goes toward the 2007 or 2008 year; that and the contribution form itself, of course.
I saw a notation of the same postmark guideline on this table of contribution deadlines created by E*TRADE. Hmmm. I guess the investment companies get so swamped this time of year that they can't keep up and use the postmarks to ensure that customers stay happy.
The IRS seems, however, to still argue for the actual April 15 filing date deadline:
You can file your tax return claiming a traditional IRA contribution before the contribution is actually made. However, the contribution must be made by the due date of your return, not including extensions. If you report a contribution to a traditional IRA on your return, but fail to contribute by the deadline, you must file an amended tax return by using Form 1040X, Amended U.S. Individual Income Tax Return. You must add the amount you deducted to your income on the amended return and pay the additional tax accordingly.
And I know that when the IRS was advising folks about the multiple account direct deposit refund option, they cautioned people to file early enough so that any refunds sent to IRAs were deposited by the filing deadline. That way a late deposit wouldn't mess up any deductions that might have been claimed in connection with the contribution.
The E*TRADE document also had another footnote that says:
So … ?
I'm looking for an IRS rule or reg that gives institutions that manage IRAs some leeway in pushing the IRA deadline via the postmark. If/when I find it (or a reader can point me in the right direction), I'll let you know.
Personally, if I were planning today on making a traditional or Roth IRA contribution for the 2007 tax year instead of one to a self-employed plan, I'd be visiting the nearest FedEx office this afternoon.
Actually, what I have done is set up online accounts, for both the hubby's and my retirement accounts, so that next filing season I just have to hit a few keyboard keys to take care of our 2008 contributions.