A guide to tax season for your IRA 

 

  1. Contribution limits 
  2. Contribution deadline/window 
  3. Tax forms 
  4. Tax advice 

Contribution limits 

An IRA contribution is any money you deposit into an IRA. Rollovers are not considered IRA contributions. 

The contribution limits for traditional and Roth IRAs are:  

Age  Contribution limit 
Up to age 50  Cant exceed the lesser of $6,000 or your earned income/your spouse’s income if you file taxes jointly. 
Age 50 or over  Cant exceed the lesser of $7,000 or your earned income/your spouse’s income if you file taxes jointly. 

Total contributions between all traditional and Roth IRAs can’t exceed these contribution limits.  

For example, if you have a traditional IRA and a Roth IRA, you cannot exceed the $6,000 or $7,000 contribution limits (depending on age) between both IRAs.  

 

The contribution limits for SEP IRAs are: 

Year  Contribution Limit 
2021  Cant exceed the lesser of $58,000 or 25% of your compensation. 
2020  Cant exceed the lesser of $57,000 or 25% of your compensation. 
2019  Cant exceed the lesser of $56,000 or 25% of your compensation. 

 

SEP IRA contributions are different than other IRA contributions. SEP contributions are designated as a contribution for the calendar year in which they are made. 

  

For example, M1 will report SEP IRA contributions made in 2020 as 2020 contributions, and any contributions made in 2021 as 2021 contributions.   

 

Contribution Deadline/Window 

The contribution window for a tax year is January 1 of the given tax year until the tax deadline of the following year (typically April 15).  

For example, you have from January 1, 2021, until April 15, 2022, to contribute to your IRA for 2021.  

From January 1 to the tax deadline (typically April 15), M1 offers the option to choose “Prior Year” or “Current Year” when making a contribution. This allows you to max out your contributions for the previous tax year. 

  

What is earned income? 

Qualified earned income for a Roth IRA includes:  

  • Wages 
  • Salary 
  • Tips 
  • Self-employment income 
  • Union strike benefits 
  • Long-term disability payments received prior to retirement age 

If you have no earned income but made a contribution to your IRA, the amount you contributed will be subject to the six percent penalty tax on excess contributions.  

The penalty tax will be applied each year that the excess contribution remains in your IRA. 

  

Tax forms 

Depending on actions taken on your IRA account, you may receive a variation of a 1099 tax document or 5498 tax document. 

Learn more about where to find your tax forms and which tax forms you can expect to receive. 

  

Tax advice 

M1 does not provide tax advice. You can consult your tax advisor regarding your personal circumstances before taking any action that may have tax consequences. 

 

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