Switching Years
Client mailed a Roth IRA contribution check today and marked it as a 2018 contribution. The custodian likely won’t receive the check until April 17th. We would actually like the contribution to be a 2019 contribution. Per the custodian, they can change the contribution year from 2018 to 2019 at our request.
Is that actually possible from a tax perspective? Or would this be an excess contribution as the client has already maxed out their traditional IRA?
Thanks!
Permalink Submitted by Alan - IRA critic on Wed, 2019-04-10 23:56
First, the custodian is allowed to use the “postmark rules” which treats the contribution as made on the postmark date even if it is not received until after 4/15. A custodian can also change the applicable year to any year that is till timely on the date the contribution was made. Therefore, the contribution treated as received by 4/15 under the postmark rules could be changed from 2018 to 2019 or vice versa. But a custodian is not required to use the postmark rules or to change the year, even when it is OK with the IRS. Client should follow up closely that this contribution is accepted and changed to 2019 because later this month the custodian will start to report on Form 5498 which year any contribution is for. Once they do that, they are not going to change the year. Therefore, client needs to follow up very soon, no later than 4/17 to confirm if the change of year has been made. Should the custodian NOT change the year, then one of these contributions will be excess and should be returned with earnings. Client could choose which one if that happened.