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Posted: 11/23/2014 11:09:49 PM EDT

I filed an extension and got the word that I owe about $1400 bucks. This is typical about every year. Being single with no deductions (yet I never claim local taxes etc.) I always seem to get boned. However I remembered that I could get some tax relief by putting some money into an IRA. Being a gov employee I have money going into a TSP account and it's matched up to 5%. The other day I pushed it to 50% just to tax-defer some income.  

It was suggested by a coworker to put a large sum into a traditional IRA. Doesn't matter if it comes from saving or paycheck. Sounds like a good idea. I'm not too worried where it goes but rather that it comes off my income for the year: IOW it lowers my taxable income. In any case, I can get more informed about specific avenues to move and invest it later, but now, I'd like to pay (invest) myself instead of the FSA. What do I need to know?
Link Posted: 11/26/2014 8:13:53 AM EDT
[#1]
It depends on your income level.  Less than 65k, I'd say lump sum is fine, more than 65k a lump sum won't help you now, you'd have to file a 8606 because it will not be deductible until after you retire.

I'm still trying to figure out how you end up owing so much.  I file single and am able to get mine about even every single year.  It sounds like you need to increase your TSP contribution at the beginning of the year, I wouldn't just do 5% because that is what they match, I'm currently dumping 13% into my IRA and my company only matches 4%.  I'm at an income point that is very affordable to me, so when I get my raise, I just dump it all into the IRA, I'm about 5% away from maxing every year.
Link Posted: 11/26/2014 8:18:31 AM EDT
[#2]
Usaa.  Go read up on IRAs.
Link Posted: 11/26/2014 12:35:11 PM EDT
[#3]
Change the number of allowances on your W4 so they withhold the correct amount and you won't owe so much.  You should only have 0 or 1.  If you already have 0 then you can write in an additional amount you want withheld.
Link Posted: 11/26/2014 9:17:02 PM EDT
[#4]
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Quoted:
Change the number of allowances on your W4 so they withhold the correct amount and you won't owe so much.  You should only have 0 or 1.  If you already have 0 then you can write in an additional amount you want withheld.
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The only thing the above accomplishes is changing the amount you have to pay as a lump sum when you file your taxes (because they just take more out of your weekly/biweekly/monthly paycheck so you don't owe a lump sum at the end of the year), it does nothing to lower the amount of taxes you pay to the government.

Yes, if you contribute to a qualifying retirement fund, you can deduct some/all of the contribution from your taxable income on your tax form, reducing how much you are giving the FSA.  As an example, with a traditional IRA you don't have to pay taxes on the amount you contribute, only on the amount you collect when you retire, so your contributions up to the maximum allowed annually are not taxable in the (tax) year you contribute (you can make contributions for this taxyear up until a certain date in 2015...I think it's April 15th and still deduct them).
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