If you’re short on cash to fund an IRA contribution this year, Uncle Sam may effectively lend you the money.
Strategy: Use your federal income tax refund to fund an IRA contribution. Simply file your 2013 return as early as you can, claiming the amount you intend to contribute. When you receive the refund, deposit the stated amount in your IRA by no later than April 15, 2014.
The IRS approved this taxpayer-friendly technique years ago. (IRS Revenue Ruling 84-18)
The IRA contribution limit for the 2013 tax year is $5,500 ($6,500 if you’re age 50 or older). If you actively participate in an employer retirement plan, the deduction phases out for a modified adjusted gross income (MAGI) between $59,000 and $69,000 for single filers; $95,000 and $115,000 for joint filers. If your spouse is the active participant, the phaseout range is between $178,000 and $188,000 of MAGI.
Tip: The IRA contribution limit for 2014 remains at $5,500 ($6,500 if age 50 or older).