A tax-filing extension affects IRA contribution

Q I am self-employed. In April I filed an extension with the IRS for my tax return. I'd like to contribute to a SEP IRA. My filing deadline is now Aug. 15, 2000. Am I allowed to contribute into a SEP IRA at this point in time? Also, is there someone at the IRS who can help me work out my contribution level based on existing IRS formulas?

R.S., via e-mail

A According to an IRS spokesperson, you can take the deduction for the SEP IRA (for self-employed people) right up to the due date of the return, plus extensions.

Since you have an extension to Aug. 15, that becomes your due date, and the final date for contributing to your SEP IRA for your 1999 earnings.

For help on your maximum deduction, call 800-829-1040. If you prefer, the customer service representative can direct you to a local IRS office, and you can walk in for assistance.

Q I am puzzled over the reply by a Social Security representative [July 24] saying all persons working for wages, etc., must pay Social Security taxes. Have the laws changed? It has been my understanding that government employees, and federal and state workers (including teachers and the military) pay into private pension plans and are not required to pay Social Security taxes on their wages.

N.M., Harwich, Mass.

A The law has changed. Since Jan. 1, 1984, all federal employees have been required to pay into Social Security. Those hired before that date, however, do pay into two government retirement plans. All active US military personnel have been required to pay into Social Security since 1957; reserves have paid in since 1988. And many new state and local government workers pay into Social Security, according to a Social Security spokesman.

In some states, however, civil servants do pay into their own public retirement plans, but all have paid into Medicare since 1986.

Currently, he says, 154 million workers pay into Social Security, representing 96 percent of the entire US workforce. Most of the "missing 4 percent," he says, is made up of older federal civil servants, and some state and local workers.

Questions about finances? Write:

Guy Halverson

The Christian Science Monitor

500 Fifth Ave., Suite 1845

New York, NY 10110

E-mail: halversong@csps.com

(c) Copyright 2000. The Christian Science Publishing Society