2021 Contribution Inquiry
Hello, we got confirmation from our back office the any checks that were received with a post mark envelope of 04/15/2022 would be coded as 2021 prior year contributions. However we received some checks on 04/17 and further that were posted marked by 04/15/2022 but now our back office is processing them as a 2022 current year contribution and not a prior year. There was some disconnect between the home office and back office but the bottom line is any check received after 04/15/2022 is being coded as a 2022 current year contribution.
The problem we are having is that we told our client’s the checks would be coded as a 2021 contribution and they filed their taxes including the 2021 contribution but in reality it will be coded as a 2022 contribution. At this point what suggestions or advice could we provide to the client since they have already filed their 2021 tax to include the contribution amount?
Any feedback would be greatly appreciated. Thank you.
Permalink Submitted by Alan - IRA critic on Thu, 2022-06-30 18:02
The due date for 2021 returns is 4/18/2022, and even a day later for a couple states with 4/18 holidays. A custodian is allowed to use the “postmark” rule, and most do, but they are not required to. Under the postmark rules, any mailed contribution with a 4/18 or earlier postmark would be assigned to the prior year unless taxpayer stated otherwise with the deposit. These contributions have already been reported to client’s and the IRS on Form 5498, which must be issued by the end of May, 2022 for 2021 contributions. Custodian is able to issue a corrected 5498 if they wish. That would avoid an amended 2021 return.
Permalink Submitted by Kevin O'Hearn on Fri, 2022-07-01 21:25
Thank you. The problem we have is our custodian deposited these checks as 2022 contributions by default and refuses to adjust them to a 2021 contribution, regardess of postmark. My assumption is that these clients filed the contribution on their 2021 return. If they keep it as a 2022 contirbution or they remove the funds as an excess contribtuion they’ll need to amend their 2021 return. Other than the service fee of amending taxes, what other ancillary costs should we keep in mind if we want to pay restitution to these clients?
Permalink Submitted by Kevin O'Hearn on Fri, 2022-07-01 21:25
Thank you. The problem we have is our custodian deposited these checks as 2022 contributions by default and refuses to adjust them to a 2021 contribution, regardess of postmark. My assumption is that these clients filed the contribution on their 2021 return. If they keep it as a 2022 contirbution or they remove the funds as an excess contribtuion they’ll need to amend their 2021 return. Other than the service fee of amending taxes, what other ancillary costs should we keep in mind if we want to pay restitution to these clients?
Permalink Submitted by Alan - IRA critic on Fri, 2022-07-01 22:27