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Funding IRA Contributions with Tax Money

Are you short on funds for your IRA contribution this year? Consider an unusual source: your tax refund.

The basic strategy is as follows: Arrange to have your 2007 tax return filed as early as possible. On the return, claim the IRA contribution. But don’t actually make the contribution until you receive your tax refund from the IRS. Then you can use that money to contribute to the IRA.

In effect, the government is making your IRA contribution for you. (Of course, this technique will not work if you are not entitled to a refund.)

Is it legitimate? Absolutely. The IRS has officially approved the idea as long as you deposit the refund money as your contribution by the April 15 deadline. It does not matter that the refund is the source of the funds.

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