NEW to IRA's

[Guest cstew]

[size=7]I am facing more tax debt than anticipated for 2005 and it was suggested I check into opening an IRA or a Roth IRA before April 17th. How would this help me as far as the amount of $$$ I owe the IRS and State?[/size]

[Lori Friedman]

A Roth IRA won't help you with your 2005 income tax liability. Roth contribution are always made on an after-tax basis and can't be deducted from your income.

A traditional IRA contribution may or may not be deductible, depending on your level of income and whether or not you participate in an employer-sponsored retirement plan. The answer is way outside the scope of this message board. You're looking for tax advice that's specific to your own situation, and all we can do here is provide general information.

[JanetM]

A contribution to a traditional IRA, assuming you qualify, means the contribution reduces your taxable income. This reduces your overall tax bill but does mean you must have the funds available to both make the contribution and pay your taxes.

IRS pub 590 explains if you are eligible for traditional IRA.

p590_2005.pdf

[GBurns]

For a better understanding of your situation I suggest that you do pro-forma returns. In other words run the various scenarios through an actual tax return program or forms.

As JanetM points out you still would have to fund the IRA and also pay the remaining taxes. Adding these together might come to more than the taxes that you think that you might owe. You will not know for sure without doing some actual calculations.