Recoding Traditional IRA Contribution
Thank you in advance for your comments.
In reviewing 5498s during a client service meeting, I noticed that a contribution made in 2011 that should have been coded for 2010 did not occur. As a result, the 2010 5498 form shows $0 for Traditional IRA contribution. However, the client did report the $5,000 as deductible contribution on her 2010 tax return. When contacting the brokerage firm that issued the 5498, it appears that we have missed the deadline to correct and reissue the updated 5498.
Is there a way to fix this??
Thank you
Tony Yang
Permalink Submitted by Alan Spross on Wed, 2012-01-25 21:35
The easy way to fix it would have been to catch this right after the contribution was made and prior to the 5498 May deadline. Even if this was solely the custodian’s fault now, they will probably take the position that the client had a duty to check the records on a timely basis and request a change, but it still may be worth a try including the benefit of making a new 2011 contribution to this custodian if they will amend the 5498. While they will probably refuse, it is still better than trying to resolve this directly with the IRS, where chances are even slimmer.
How has this affected what she plans for 2011? Bars her from a 2011 contribution? Can she deduct this contribution in 2011 or will it be non deductible?
The deduction on the 2010 1040 will likely be caught in IRA matching, so the only logical fix if the above attempts fail is to amend the 2010 return to remove the deduction, and the IRS may also charge interest on the additional tax liability for 2010.