Changing current-year to prior-year contribution deadline?

Submitted by Geoffrey Foisie on Tue, 2013-04-02 15:13

On April 2nd of 2012, a friend and his wife made contributions to his SEP-IRA and her Roth IRA, labeling both as current-year (2012) contributions. Only now do they realize that they should have labeled them as prior-year (2011) contributions. Is there anything that they can do at this point to have them relabeled? I have a feeling the answer is no, but I thought I would check with the experts.



Submitted by Jose Morales on Tue, 2013-04-02 16:51

SEP contributions are reported on a calendar year basis, so it would be on a 2012 5498 regardless of the tax year that the employer takes the tax deduction for making the contribution.  Have you filed your 2011 taxes yet and did you include the SEP contribution made in April of 2012 on your 2011 tax forms?The deadline to make a 2011 Roth contribution was the tax filing due date for 2011, with no extensions.  If you clearly designated the contribution to be for 2012 you cannot simply have it changed at this time.  If it was miscoded by the IRA Custodian then they would be required to provide a corrected 5498 for 2011 and 2012.



Submitted by Geoffrey Foisie on Tue, 2013-04-02 17:12

urusei2Thanks for your reply. As it is not my return I am only guessing, but I’m pretty sure that for the person with the SEP,  the contribution made in April 2012 was reflected in his 2011 tax return. However I’m certain that the contribution was coded by the custodian as being a current year [2012] contribution [at the person’s request]. So, perhaps the tax form was indicating one thing and the SEP-IRA account was indicating another. If so, would that create an issue that needs to be addressed? PS, I’m pretty sure he is a calendar year filer.



Submitted by Alan - IRA critic on Tue, 2013-04-02 18:40

  • If the person deducted the SEP contribution on his 2011 return, that is OK because the SEP custodian does not collect effective year information and report only on a year received basis. Person could now make their 2012 SEP contribution and the custodian will report it as received in 2013. The SEP is therefore not a problem.
  • The Roth however is not so simple. They have missed out on their 2011 Roth contribution, but their 2012 Roth contribution has been made. If they do not qualify or do not want a 2012 Roth contribution, they can still withdraw it or recharacterize it as a TIRA contribution for 2012. Since a Roth contribution is not reported on the tax return (except Form 8880 if it applies), the 2011 return is still correct, but the 5498 they will receive next month will show a 2012 Roth contribution.


Submitted by Geoffrey Foisie on Tue, 2013-04-02 21:37

Alan-iracritic.  Thanks for your informative response. I’m going to try to restate some of what you said with a question or two. Apologies in advance for being so ignorant. As for the SEP IRA, are you saying that the SEP custodian doesn’t report any effective-year information to the IRS, even though the SEP owner’s letter of instruction to the custodian designated the contribution as “current year” and the custodian showed it as a “CURRENT YEAR EMPLOYER CONTRIBUTION” on the brokerage statement for that month? It sounds as if the SEP owner doesn’t have to do anything since the contribution made in April 2, 2012 was correctly reported on his 2011 tax return, and the contribution made this week would be correctly shown on his 2012 tax return. In short, he can ignore the fact that he gave erroneous instructions to the custodian in April of 2012. As for the Roth IRA, both you and urusei2 suggest it is too late to do anything about the April 2012 contribution, which the Roth owner incorrectly told the custodian was a current-year contribution [It should have been labeled as a 2011 contribution]. The owner made a $6,000 contribution to the Roth in April of 2012 and I’m guessing she can’t make any further 2012 contribution to a TIRA. As for the Roth owner’s tax return for 2011, I’m guessing she did not qualify for the 8880 credit. Based on what you say she probably did not report the Roth contribution on her tax return; therefore no adjustment would have to be made. Based on what you say she can’t relabel the contribution made in April, 2012, and so any contribution she makes this week will have to be a current year [2013] contribution. Please let me know if I’m misunderstanding anything.



Submitted by Alan - IRA critic on Tue, 2013-04-02 22:35

Re the SEP contribution, that would be correct and urusei indicated the same. The SEP custodian does not assign effective years on Form 5498, and the contribution was made in time for the 2011 contribution. For the Roth your understanding is correct. There are still other options for the 2012 Roth contribution as I mentioned, but assigning it to 2011 is not one of them. Since the prior contribution is for 2012, she can now make a 2013 Roth contribution. The net result of both IRAs is that nothing needs to be done on her tax return, but she looses a year of Roth contributions in the process. But now she makes her Roth contribution early in the year rather than in the prior year as a result of the lost 2011 contribution.



Submitted by Geoffrey Foisie on Wed, 2013-04-03 01:20

Hopefully if the SEP owner makes a prior-year contribution this week, the custodian won’t have fits since his year-ago contribution was a current-year, i.e., both 2012. As you suggest [I hope correctly], the IRS would rely on the tax filings, not on what the custodian thinks. Thanks much for your help. 



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