Change Deposit Year
Hello-
Client has been making monthly Roth IRA contributions. The contributions have been credited as 2021 contributions. The client would like to change them to 2020 contributions as they have not yet maxed out their 2020 contributions.
If the custodian allows for this, is there anything from the IRS perspective that would keep an individual from changing which year a contribution applies to? Does it matter which year you originally intended for the contribution to apply to?
Thank you!
Permalink Submitted by Alan - IRA critic on Mon, 2021-05-03 18:20
As long as it is done when contributions for either year are “timely”, the custodian should be able to make the change and issue a correct 5498 to report the prior year contributions. In other words, contributions made in 2021 are also still timely for 2020 up to 5/17/2021. The custodian has an extra month this year to report 2020 contributions on Form 5498, so could change these recent contributions to 2020 and issue a 5498 for 2020 (due end of June), which shows the year to date contributions in 2021 as 2020 contributions. To be clear, it does not matter which year the originally intended the contributions were to be for, the custodian can change them if still timely, but are not required to. All the IRS cares about is what the 5498 indicates. The custodian should be able to confirm right away if they are willing to change the year for 5498 reporting or not. If they refuse, client can still make a one time specific additional 2020 contribution by 5/17. FInally, based on whether the recent monthly contributions are changed or not, client needs to track the amount of 2021 contributions to avoid any issues for 2021.
Note that periodic automatic contributions are almost always assigned to the year in which they are actually contributed, and this must be recognized by IRA owners.