Roth IRA 2016 Contributions
Hi, I’m new to the forum and have a question about filing and reporting for my Rorth IRA. My goal has been to maximize my Roth IRA contributions and I thought that I had done so in 2016.
Background: I opened a Roth IRA account with the robo-advisor Wealthfront in June 2016. In the period between June 2016 and early April 2017 (the deadline for deposits to be counted as 2016 contributions), I contributed $6,000 to my Roth IRA. $500 of that was my initial deposit in June 2016; $1,000 was a one-time deposit I made in March 2017, and the rest was in recurring monthly deposits of $450.
I found out today that recurring deposits are counted only for the year in which they are made; in other words, the $450 I deposited monthly in January-April 2017 did not count for my 2017 contribution (the one-time $500 and $1000 deposits I made were not affected), which means that in the Form 5498 that Wealthfront reported to the IRS, it showed that I had only made $4,650 in 2016 contributions. If this is confusing, I can provide a schedule of my deposits.
When I called Wealthfront to ask how I can make sure my deposits in early 2017 could be counted toward 2016, they said that they could not accommodate this due to rules from their partnership with Apex. Apex apparently will not let Wealthfront make any more “exceptions” for their clients. Wealthfront also said that many other clients had raised the same concerns that I had.
My question: Is there anything I can do to retroactively “re-code” my January-April recurring deposits so that they count for 2016? Is there anything I can do to change or resubmit the Form 5498 so that it reflects the maximum contributions? I have received an extension for filing my 2016 taxes, so now they are due in September 2017. Although I know that Roth IRA information is not reported to the IRS, would making a note in my tax filing software be useful later down the road? I understand that there is only a difference of $1,000 between my maximum 2016 contribution (which I thought I had made) and my reported 2016 contribution, but compound interest amplifies this difference to $10,000 over the next 30 years.
Thank you very much ahead of time for your help!
Permalink Submitted by Alan - IRA critic on Thu, 2017-08-10 17:50
Application of the 2017 automatic monthly deposits to 2017 is pretty much automatic throughout the industry, unless you are able to specifically override this with the IRA custodian before the year begins. Once the 5498 is filed showing your 2016 contribution total, that is locked in unless you can show the custodian that the fault is 100% theirs. I expect quite a few taxpayers get tripped up by this. Therefore, all you can do now is accept the outcome and move on with respect to 2016. If you need to continue the monthly deposits, you should carefully check the math to account for your 2017 contributions starting in January. Then adjust the deposits amount accordingly, or if you can afford it, discontinue them and just make unscheduled deposits. Eventually, once you can afford it, you would probably want to make your contributions in a lump sum and make them early in the year in which they are for. Meanwhile, any contributions you make between January and April should be clearly flagged as to which year they apply to.