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You can still make 2020 contributions to your IRA through the new May 17 tax deadline—don't miss your chance

Here's what a financial advisor suggests you should do during this window of time.

Taiyou Nomachi | DigitalVision | Getty Images

For the second consecutive year, the Internal Revenue Service has pushed back the federal tax deadline to allow more time for the agency handle increased paperwork amid the coronavirus pandemic.

This year, your federal taxes are due May 17, which might spark some confusion for retirement savers wondering if they can still make 2020 contributions to their IRAs through the new tax deadline.

The answer is yes — you can make 2020 contributions to your IRA through May 17. And according to Kevin Driscoll, vice president of advisory services at Navy Federal Financial Group (NFFG), this extended time period is a major opportunity.

Normally, retirement savers have until April 15 to contribute to the previous year's IRA. This deadline also applies to contributions made to health savings accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs) and Coverdell education savings accounts (Coverdell ESAs).

The annual IRA contribution limit is $6,000 for most individuals, plus an additional $1,000 for taxpayers 50 and older. If you weren't able to max out your IRA in 2020, this extended deadline might give you the perfect chance, Driscoll says.

Savers have until each year's tax deadline to make these contributions since any money you get back from your tax return was technically earned in the previous year and therefore eligible for IRA contributions. Early filers, if they so choose, can boost their retirement by putting their return right into their IRA instead of spending it.

This is a smart financial move for anyone who has steady income and saw their expenses decrease during the pandemic because they have fewer commuting costs or perhaps received a work-from-home stiped that covered the cost of some utilities. With people traveling less and staying home more, many Americans were able to save more than ever.

This savings, plus stimulus checks of up to $5,600 for families of four might create more opportunities within your budget to pad your retirement, says Driscoll.

"Ask yourself, 'Can I find an extra $250 or so because I'm working remotely and was able to save?' Have a discussion with the family about how much money you can put aside," he advises.

"It was such an unexpected year for so many people," says Driscoll. If your circumstances have freed up some expenses, it's worth taking advantage of that savings by planning ahead and investing in your retirement fund.

Prepare now for the upcoming tax deadline

While the new May 17 deadline gives taxpayers some breathing room, you should start preparing your taxes now. The sooner you file, the quicker you'll know how much to expect back from your return and can plan your 2020 IRA contributions better. Also, don't forget: the tax deadline is still April 15 in some states (see a full list of state tax deadlines here).

Select evaluated the best tax prep software and ranked them based on cost, user experience, expert tax assistance and Better Business Bureau rating. Here's our list of the best tax programs for fast, accurate filing:

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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