by Emily Brandon
In order to get tax breaks for saving for retirement in a 401(k) or IRA, you need to meet certain deadlines. Retirees also need to pay attention to specific dates to avoid tax penalties. Here are some important dates to keep in mind for tax year 2012:
Dec. 31, 2012. Contributions to 401(k)s, 403(b)s, 457s, and the federal government's Thrift Savings Plan are generally due by Dec. 31, 2012. Workers can defer taxes on up to $17,000 in their 401(k) in 2012, or $22,500 for workers age 50 and older.
Retirees older than age 70 1/2 generally must take required minimum distributions from their traditional 401(k)s and IRAs by the end of the calendar year and pay the resulting income tax on the withdrawal. The tax penalty for failing to withdraw the correct amount is a 50 percent excise tax on the amount that should have been distributed. People who are still working after age 70 1/2 and don't own 5 percent or more of the business sponsoring the retirement plan can delay distributions from their current 401(k), but not IRA, until they actually retire.
Feb. 1, 2013. Survivors of Hurricane Sandy may be allowed to take 401(k), 403(b), 457, and Thrift Savings Plan hardship distributions and loans to pay for storm-related expenses or to assist a son, daughter, parent, grandparent, or other dependent who lives or works in the disaster area until Feb. 1, 2013. The usual six-month ban on new 401(k) contributions after a hardship distribution will also be temporarily suspended for people impacted by the storm. However, regular income tax, and for people under age 59 1/2, the 10 percent early withdrawal penalty will still apply to these hardship distributions.
April 1, 2013. If you recently turned age 70 1/2, you have until April 1 to take your first required minimum distribution from your retirement accounts. For example, a retiree whose 70th birthday was on July 1, 2011 and who reached age 70 1/2 on Jan. 1, 2012 must take his first required minimum distribution by April 1, 2013. However, if you delay your first distribution until 2013 you will need to take two distributions in the same year, because the second and all other subsequent distributions will be due Dec. 31. Two required withdrawals in a single year can result in a significant income tax bill for some people.
April 15, 2013. Retirement savers have until April 15, 2013 to make 2012 IRA contributions. Workers can contribute up to $5,000 to a traditional IRA, Roth IRA, or combination of the two accounts in 2012, and employees age 50 and older can deposit $6,000. For contributions made between Jan. 1 and April 15, 2013 you will need to specify which tax year you want the deposit to count toward. If you fail to select a year, the financial institution may automatically apply the transaction to the calendar year in which payment was received. You can claim an IRA contribution on your tax return before the money is actually in your account, but the deposit needs to take place by April 15, 2013 at the latest.