As the tax filing deadline quickly approaches, many taxpayers are feeling the pressure. We understand that tax season can be stressful, especially when it comes to navigating IRA-related details. To help you stay on top of things and ease some of that stress, we've put together a few practical tips and reminders. Whether you're making last-minute contributions or need guidance on reporting distributions, these insights can help you stay organized and ensure you're making the most of your retirement savings. Let's dive into what you need to know to keep things on track this tax season.
Contributions Tips
Review Your IRA Contributions
Your IRA contributions are reported to both you and the IRS on IRS Form 5498. For Traditional IRAs, contributions must be reported on your tax return either as deductible (on Form 1040 Schedule 1) or nondeductible (on Form 8606). Roth IRA contributions aren't reported on your tax return, but it's important to keep track of them to determine and report the taxability of any future nonqualified distributions.
Carryback Contributions Can Save You Money
If you're eligible to contribute to an IRA for the 2024 tax year but haven't contributed yet, you can still make a contribution up until the tax return due date—extensions may apply for disaster relief cases. Many taxpayers wait until they prepare their returns to determine IRA eligibility and possible deductions. If you make an IRA contribution in 2025 for the 2024 tax year, complete and submit the STRATA's Deposit Certification form with your contribution to ensure the funds are earmarked for the 2024 tax year.
IRA Contribution Limits and Excess Contributions
The IRA contribution limit for both 2024 and 2025 is $7,000 per year. Individuals who turn 50 during the year can make an additional $1,000 catch-up contribution. There are no age restrictions for IRA contributions as long as you have earned income. Some taxpayers in their 70s and beyond still earn qualifying income and can contribute to their IRA while taking required minimum distributions. If you contribute more than the allowed amount, or if you change your mind about an IRA contribution, you can remove the excess contribution by the tax return due date (including extensions). Don't forget to also remove any "net income attributable" (NIA) associated with the excess contribution. Consult a tax professional to help calculate NIA accurately.
Distributions Tips
Remember to Report Distributions
If you've taken an IRA distribution in 2024, you must report it on your tax return. Failing to do so could lead to IRS scrutiny. This includes distributions rolled over into another qualified retirement plan within 60 days. If you rolled over a 2024 distribution in 2025, be sure to attach a statement explaining the rollover. Note that early distributions before age 59½ may be subject to an additional tax unless an exception applies.
Traditional IRA Distributions
Most Traditional IRA distributions are fully taxable. However, if you've made nondeductible (after-tax) contributions, part of future distributions may include both after-tax and pre-tax amounts. To avoid paying taxes on the nondeductible portion twice, report this return of basis on IRS Form 8606.
If you've had withholding on your distribution, include a copy of Form 1099-R with your tax return to receive credit for the taxes already paid.
Roth IRA Distributions
Roth IRA distributions are simple to report. A code "Q" in box 7 of your 1099-R means the distribution is qualified (the Roth IRA has been open for at least five years, and you've met a qualifying event, such as turning 59½). This distribution is nontaxable, and your 1099-R will verify this. However, for nonqualified distributions, you'll need to file Form 8606 to report any taxable amount.
Additional Information
By staying organized and informed, you can make tax season easier and ensure you're maximizing the benefits of your IRA. Remember to keep track of your contributions, be mindful of the deadlines for carryback contributions, and accurately report any distributions.
STRATA offers resources to help you understand these transactions, but it's always a good idea to seek a qualified tax professional for personalized guidance. Check out our FAQs on self-directed IRA on withdrawals from self-directed IRAs and IRS reporting, or refer to our 2025 IRA Calendar for deadlines and helpful reminders. With these tips in hand, you'll be well-prepared to tackle your IRA-related tasks and move forward with confidence in your retirement savings.
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