IRA contribution time is almost up
Wednesday, April 14, 2010
After a tax year ends, there's only one tax break available to most taxpayers for that prior year: a contribution to an IRA.
While Roth IRAs have now surpassed the original traditional retirement accounts, regular old IRAs still appeal to many filers. The reasons are twofold.
First, as already noted, the contributions can be made to the accounts between Jan. 1 and April 15 and count toward the previous tax year. That's also the rule for Roth IRAs, too.
And as for traditional IRA money put into the plan, for some taxpayers the contribution amount is tax deductible for that prior year.
But that then raises the question, exactly what has to be done by April 15?
Must your IRA contribution be physically deposited in the account by 4/15? Or, in the case of account holders whose IRA is held somewhere outside their hometowns and to which they mail their contributions, can the envelope delivering the retirement account check simply be postmarked by tomorrow?
There's a difference of opinion here. Some tax pros say postmarks, a la the timely filed rule allowed tax returns, is fine. Others say the money must actually be in the IRA by close of business April 15.
Let's look at the IRS document on this, Publication 590. On page 12, it says:
Contributions must be made by due date. Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means that contributions for 2009 must be made by April 15, 2010, and contributions for 2010 must be made by April 15, 2011.
If I were a hard-nosed tax examiner and read this, I'd say postmarks be damned. If the money wasn't in the account on April 15, it counts toward the next year. Now give Uncle Sam back some of your tax savings based on this deduction.
Of course, the reality of the IRS checking the precise contribution delivery day of every IRA deduction is unlikely. Still ...
So if you plan to put money in your IRA and deduct that amount on your 2009 return, to be safe you need to get the contribution to the account ASAP.
If you have to send it to an out-of-town IRA manager, express mail or use a private delivery service today to make sure it gets there tomorrow.
Check with your account holder: You also might want to call your IRA manager.
The mutual fund company that holds my IRA says that if the envelope is postmarked by April 15 and the deposit slip I send with my check says it's for the prior tax year, that's how the company will record the deposit.
In reality, said a spokesman who asked that I not use his name, the company is getting so many contributions right now that some of them won't actually be dealt with on April 15 even if they arrive in the office tomorrow.
Still, if that fund company or your IRA manger actually gets the deposit by April 15, then there's at least the possibility that it will go into your account then and you don't have to worry.
And I have to agree with Twitter buddy @mitchpfs, who says, "I'd prefer proof of a cleared check. A certified mail receipt can't prove what's in the envelope."
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