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A retirement savings hack thanks to this year’s delayed deadline for filing tax returns

The deadline to file taxes and contribute toward last year’s IRA limit was delayed to July 15

Taxpayers can contribute to their individual retirement accounts on behalf of last year until July 15.

MarketWatch photo illustration/iStockphoto

The government’s decision to delay the deadline for filing 2019 tax returns allows some people to hold on to cash they may need. It could potentially help Americans’ retirement savings too.

Treasury Secretary Steven Mnuchin announced the deadline for filing returns had been delayed three months, from the usual April 15 to July 15 this year. The decision was made to help Americans hold on to the money they may otherwise have had to pay the Internal Revenue Service when they filed their taxes next month. It will also allow filers more time to prepare returns and for payments as the pandemic has caused massive financial disruption for many families, in addition to delaying the usual yearly meetings with tax professionals.

Across the country, people are worrying about their financial situations amid a major health crisis. A record 3.28 million people applied for unemployment benefits, according to the latest figures, and many others are suffering a reduction in income as a result of state and city lockdowns that force nonessential workers to stay home because of the spreading coronavirus. President Donald Trump said in a press conference Sunday evening he was extending guidelines for Americans to socially distance from one another until April 30, at the earliest.

For taxpayers who are not entirely cash-strapped, the delayed deadline for filing tax returns provides a perk: they can earmark their contributions into an individual retirement account for the year before if they hadn’t gotten a chance to max it out. Usually, Americans have only until April 15 to contribute to an IRA in honor of the previous year, and that deadline ends when tax returns are due.

The maximum contribution for an IRA in 2020 is $6,000 (as it was in 2019), with an additional catch-up amount of $1,000 for people 50 and older. Taxpayers who are not covered by an employer-sponsored plan can deduct their contributions in full, while others will face phaseouts, depending on if they have access to a qualified account like a 401(k) and how much they earn. Taxpayers who earn beyond the limit can still contribute to an IRA but cannot deduct the contribution.

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