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Don’t let April 15 catch you off guard

April 15 has long been considered a date to avoid. Wouldn’t it be nice if you could do something to lower your federal income tax burden instead of mailing a big check on April 15? With a traditional Individual Retirement Account (IRA), you may be able to do just that.

A contribution of the 2009 maximum of $5,000 by April 15, 2010 could reduce your taxable income, making your federal tax burden less for the year. If you were 50 or older by the end of 2009, you can add a $1,000 catch-up contribution to potentially reduce the tax burden even more. If you already have a traditional IRA, plan to make a contribution by the April 15 deadline. If not, talk to a financial professional as soon as possible to start one.

There are restrictions governing who may deduct contributions to a traditional IRA. If you don’t qualify for a traditional IRA deduction, consider a Roth IRA. You won’t get the federal tax deduction now, but qualified withdrawals can be made free of federal income tax during your retirement years.

Simply put...contributing to a Roth Individual Retirement Account (IRA) may be a smart money move. The question then is...are you taking full advantage? The benefit of contributing to the Roth IRA is the money you put into one of these accounts grows tax free and distributions may be made tax free.

If you haven’t opened a Roth IRA, do it now. You have until your tax deadline (typically April 15) to set up an account and make contributions for the previous year. Annual contributions are limited; currently the maximum amount is $5,000. That means you can invest $5,000 for 2010, giving you a solid start to your savings.

If you’re just starting to invest, the Roth IRA should be one of your first options — even before you open a regular, taxable account or contribute to a workplace retirement savings plan. The only exception is if your employer offers a match on your 401(k) contributions. That’s free money you don’t want to pass up. You can invest in both a Roth IRA and a workplace retirement plan.

Not sure where to find money to fund your account? Consider investing your tax refund. The amount could be a great start for funding a Roth IRA.

There are specific income restrictions for contributing to a Roth IRA. Contributions are limited and based on the taxpayer’s filing status and Modified Adjusted Gross Income (MAGI). When the taxpayer’s income exceeds the eligibility limits for contributing to a Roth IRA, an eligibility phase out period begins.

For 2010, the MAGI phase out range for contributing to a Roth IRA is:

n At least $167,000 but less than $177,000 for a married couple filing a joint return or a qualified widow(er)

n At least $105,000 but less than $120,000 for a single individual or head of household

n Less than $10,000 for a married individual filing a separate return

Your exact contribution amount can be calculated using the worksheets found in Publication 590 on the IRS Web site at

Either way, having a plan for retirement is important. You owe it to yourself to make the best plan as soon as possible.

Wayne Scroggins, the president and owner of Scroggins Insurance Agency, with an office at 6505 Cortez Road West, Bradenton, FL 34210, can be reached at 941-795-1500.