If I owe taxes, can I put the money I owe to an IRA?

Question

I heard that you can put some of the money you owe into an IRA. For example if you owe $9,000 in taxes, $4000 of it can be contributed to an IRA. Is this true? If so what is the qualifications?

Answer 1

You can contribute to a traditional IRA up to $4,000 ($5,000 if you're over 50). Whether you get a deduction for it or not depends on your income, filing status, and whether you're covered by a retirement plan at work (whether or not you participate). For example, if you're filing single, covered by a retirement plan, and made under $50,000, you would get the full deduction. If you made over $60,000, you would get no deduction.

However, this contribution (assuming its tax-deductible) is an adjustment to income. It will reduce your income by $4,000. The tax savings on this amount depends on what tax bracket you are in. So if you are in a 25% tax bracket, this IRA contribution will save you $1,000 in taxes. You will still owe the $8,000 remaining balance in your example.

The IRA contribution would have to be made by 4/17/07, unless you filed an extension.

Any tax due is due by 4/17/07. Tax paid late will incur interest and penalties.

Answer 2

No, that's not true at all. If you contribute to an IRA, you MAY be able to take a deduction from your income on your tax return for the amount of the contribution. That will reduce your tax liability for that tax year. It will NOT have any affect on any debt that you otherwise owe to the IRS.

Answer 3

We make over $150,000 and are over 55 we owe $4,000 in taxed can we put that amount in our IRA and not pay it to the IRS

Answer 4

It depends on how much you make a year. I'm pretty sure if you owe 9000 you make too much.

Answer 5

Not true.