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IRS extends deadline for 2020 IRA, HSA contributions: Here’s how the headlines could affect your money

Taxpayers have till May 17 to make 2020 contributions to certain tax-advantaged accounts like IRAs.

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Markets start the week off mixed, the IRS extends the deadline to make an IRA contribution for last year, and some states won't offer tax benefits on jobless aid. Here's how the headlines could affect your money.

Markets mixed on Monday

Markets started the week off mixed. The Dow added 98 points and hit a record high Monday, while the S&P 500 fell 0.09% and the Nasdaq shed 0.6%. 

All three major indexes traded lower Tuesday morning as traders reacted to rising bond yields.

IRS extends deadline for prior-year IRA contributions  

The IRS announced Monday that taxpayers now have until May 17 to make 2020 contributions to certain tax-advantaged accounts including IRAs, Roth IRAs, and HSAs. The extension comes almost two weeks after the agency delayed the federal tax filing deadline to May 17.

A quarter of people don't know such prior-year contributions are legal, according to a 2019 NerdWallet survey. But experts say they can be a smart way to catch up. Just be sure to tell your financial institution that you want the money to count for 2020, not 2021.

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What is the difference between Roth and traditional IRAs

Video by Courtney Stith

Some states are still taxing jobless aid

People who received unemployment last year may qualify for a federal break waiving the tax on up to $10,200 of those benefits. 

Some states have followed suit, and others don't tax unemployment benefits. But as of Monday, 13 states are still fully taxing unemployment compensation, according to H&R Block data provided to CNBC. 

Before filing, check what your state is doing. You may need to add back any unemployment benefits excluded on your federal tax return when preparing your state taxes.

Words you've heard: IRA

An individual retirement account, or IRA, is a tax-advantaged investment account meant to help people save for retirement. The two most popular kinds: traditional and Roth. Each has different benefits and eligibility requirements.

Compared to a 401(k), an IRA offers a wider range of investment choices and more flexibility to pick low-cost funds. You can put $6,000 in an IRA for 2021.

Although the daily news can have an impact on your wallet, remember to take a long-term outlook when it comes to decisions on spending, saving, and investing.

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