Budget Freak

You’re allowed to make contributions to your IRA account for the previous year up until the tax deadline. So, for this year, you can make contributions to your 2006 IRA up until April 17th. I, in fact did this very thing a few weeks ago.

However, I was reading Blueprint yesterday, and he said you must make your contribution before you file your taxes. This could be a problem for me since I filed my taxes in February, and opened up my account in March.

I read a few of the comments, and No Credit Needed and The Happy Capitalist seemed to think it didn’t matter if you had filed before you made the contribution. I talked to my accounting teacher last night (who is a CPA), and she said it’s probably OK, but not the best way to do it. She said, in other words, “You’ll probably get away with it.” Not exactly reassuring.

Does anybody know for sure out there? I could understand if this was a traditional IRA account and I was deducting the contributions, but I opened a ROTH IRA with after tax dollars, so there is no deduction and, thus, nothing to report to the IRS. Right???

I finished up my taxes for 2006 today, thank you Turbo Tax. It was pretty easy going. I tried to add up all my deductions for the year, but it didn’t come close to the standard deduction, so I just ended up taking that. I had 3 W2’s this year, and I thought that might be a hassle, but it really wasn’t. Only took about an hour of work to fill out the forms and answer all the questions. I’m going to be getting $864 back from federal and another $110 from state. I mailed in the forms, but I’m having it deposit directly to my checking account, so I’ll hopefully be getting the refund in a couple weeks.

I ran some numbers on how much tax I actually paid for the year. 3.8% of my total gross income went to the state, and another 12.7% went to my federal taxes. When you include Social Security and Medicare withholdings, 24% of my gross income went to some form of taxes.

Also, I ran some numbers on my pre-tax contributions. I paid out $560 for health and dental insurance, and contributed a total of $2,733 to my various 401(k)’s throughout the year. That 401(k) total is a little low, in my opinion. Most of the year I was contributing around 8%. Now, it’s bumped up to 12%, and in 2 months, I’ve already stashed away $1000.

I can now close the books on 2006. It was far and away my most successful year financially. It was also the only year so far I’ve been employed full time for the entire year (save 2 weeks of in between jobs). Let’s hope I can have more success in 2007.