IRA Contribution – custodian error

Submitted by Erin Gaeta on Fri, 2016-02-05 16:18

Have you experienced any issues where an individual makes their IRA contribution for a previous year. It is included on their tax return as deduction for the previous year and is later found that It has been coded as current year by the custodian. When the custodian is asked to change it, they indicate they are unable to but are told to file a form and explanation with the IRS.

Is that the proper route to take? what would you recommend?

Thanks for any insight



Submitted by Alan - IRA critic on Fri, 2016-02-05 16:46

  • There is no form to file with the IRS unless the custodian is referring to a letter ruling request. The current cost of a PLR request is way too high to consider it for a regular IRA contribution. The only recourse here is against the custodian if the contribution form or the check itself clearly indicated a prior year contribution and the custodian assigned it to the current year. Otherwise, if this contribution was assigned to 2015, but deducted for 2014, the 2014 return would have to be amended to delete the deduction. Then 2015 would need to be examined to see if there is an excess contribution for 2015 because of this. There is still time to remove any 2015 excess contribution or to recharacterize it to a different IRA type if there is also a 2015 issue.
  • If taxpayer has evidence that the contribution assignment was 100% custodian error and custodian refuses to issue a corrected 5498, since a PLR cost is prohibitive, the taxpayer could contest the situation with the IRS if the IRS contests the return, but I am not aware of any particular form to file for that.

 

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