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By Theresa Fry, Senior Vice President and Manager, IRA’s and Retirement Planning

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If you have filed your tax return and are anxiously awaiting your income tax refund, have you decided what you will do with it?  Last year the average federal income tax refund was $2,869[1].  The majority of IRS refunds are processed within three weeks, so you have a little time to decide if you will save it or spend it.  Before you go planning your next vacation, you may want to consider using your refund to start or build up an emergency fund, lighten your debt, or jump start your retirement savings.

Regardless of when you file your income tax return, Wednesday, April 15, 2020 is the deadline for making 2019 IRA contributions.  Even if you apply for an extension of time and file your tax return later in the year, your traditional and Roth IRA contributions must still be made by April 15th.  Roth IRA contributions are not tax deductible and do not have to be reported on your income tax return.  Traditional IRA contributions—in certain circumstances—are tax deductible and must be reported on your income tax return whether you take the deduction or you file Form 8606 to report your contributions as non-deductible.

If you haven’t yet filed your tax return and are expecting a refund this year, there is an easy way to turn that refund into retirement savings without being tempted to spend it. Did you know you can direct deposit your tax refund into your traditional or Roth IRA? If you file IRS Form 8888, you can split your refund into as many as three different accounts, including your IRAs.  All you will need to direct deposit your tax refund to your IRA is your account number and the financial institution’s routing number, so check with your financial institution beforehand to get the appropriate information.  The IRA must be in your name.

Most financial institutions will treat the IRA deposit as a current year contribution.  For 2020, you can contribute up to $6,000 to your IRAs ($7,000 if you are age 50 or older). That is a combined limit between any traditional IRAs and Roth IRAs you own.  This is also the first year of new IRA savings opportunities due to the Setting Every Community Up for Retirement Enhancement (SECURE) Act.  For the first time, if you (or your spouse) are still working and have earned income, you can continue making traditional IRA contributions regardless of your age.  You will no longer be prevented from making contributions just because you reached age 70 ½ or because you are taking required minimum distributions (RMDs).  In addition, graduate students with fellowship or stipend income and home healthcare workers, including foster parents, with “difficulty of care” payments can treat that income as compensation for making traditional or Roth IRA contributions.  Both new saving opportunities are available for 2020 contributions.

The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards & Co. does not provide legal or tax advice, therefore it is also important to consult with your legal and tax professionals for additional guidance tailored to your specific situation.


[1]Filing Season Statistics for Week Ending December 27, 2019,


March 17, 2020 |