I set pre-tax money aside in 2011. (didn't do estimated taxes, paid neglible penalty)

My tax bill is lower than the amount I set aside in 2011. I still have wage work, so can I use the remaining money as a 2012 IRA contribution? I am curious because I figured everything in 2011 is now "post tax"

but maybe I am over thinking it

  • 1
    I am confused about your use of the term pre-tax and post-tax. Are you a W-2 employee? Did you have the ability to participate in a 401k. You mention that you should have done estimated taxes, so it looks like you might be self-employed. Pre-tax normally means funds that are not used to determine how much tax you will owe. They could be a regular IRA, 401K, medical premium...etc. If you have money to invest, and you are allowed to deposit money into an IRA, and you haven't reached the 2011 maximum, you might be able to deposit money, and have it count for 2011. More details are needed. Mar 15 '12 at 12:38
  • 1. for 2011 I contributed the max amount to my IRA already. 2. I am self-employed. 3. I set aside 30% of earnings for taxes, yet my real tax bill for 2011 earnings after other deductions was less than that.(these deductions included the -$5000 contributed in 2011 to my IRA). With the remaining money set aside for 2011 taxes, that wasn't part of that tax bill, can I contribute that to my IRA for 2012 max contribution. I make a decent amount of money.
    – CQM
    Mar 15 '12 at 16:32
  • The OP's reply questions introduces further confusion. Where did you set aside 30% earnings for taxes? Did you send that in as estimated tax payments? Employees can set aside money from their salary to pay medical expenses etc in Flexible Spending Accounts. This money can be used for the allowed purposes but is not reported on W2 forms as taxable income. On the other hand, money not spent during the year is lost. You cannot use it next year. Self-employed people don't have this privilege, but can set up their health-care plan to re-imburse employees for all medical expenses etc. Mar 15 '12 at 20:36
  • The question of saving in one's retirement account pre or post-tax should be based in part on your marginal rate which you may only know at year end. Those who are just over the 25% bracket for example may want to go pretax just to hit the 15% and post tax (roth) for the rest. Not understanding what "I use the remaining money as a 2012 IRA contribution" means, there's an annual limit for the 401(k) and IRA accounts. Mar 15 '12 at 22:34

On re-reading the question, I see that you're self-employed, decent income, but only have an IRA. Since the crux of the question appears to be related to your wanting to put aside more money, I suggest you open a Solo 401(k) account. The current year limit is $17,000, and you can still have an IRA if you wish.

  • Joe, yes I have come to that conclusion. I'll contact my brokers in the morning. I'll look into a Solo 401(k) Roth that I get to self administer with lowest fees. Boy am I picky
    – CQM
    Mar 16 '12 at 6:09

Because you have maxed your 2011 contribution, you can't add any more for 2011. If you have 2012 income you can make a contribution anytime between now and April 2013.

Only you can determine if this makes sense for you, but there doesn't appear to be any reasons to suspect you can't do this.

(this was based on your comments to the original question)

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