IRA Deposit to Wrong Tax Year

Submitted by Matt Groome on Mon, 2019-04-01 14:56

I had a client that made a Roth IRA deposit in March of 2018. The client wrote on the check 2018 Roth IRA contribution. There was an income limit in place (deposit was for his child) and the actual deposit was $3,300. The income of $3,300 was earned in 2017, not 2018.

In 2018, the child had income in excess of $3,300 so I do not see any issue there, correct? Is there a way to code the March 2018 IRA contribution as a mistake and have that show as a 2017 IRA Contribution instead? The custodian is Charles Schwab. The client now wants to make a deposit for 2018, but it seems like we cannot make the contribution for 2018 because one is already on file for 2018. In addition, if there are concerns income might not be over $6,000 for 2019, we should likely wait until Spring of 2020 for the 2019 contribution, correct?

I should say, a 2017 Roth contribution was not made in calendar year 2017.

Thanks for any thoughts you might have.



Submitted by Alan - IRA critic on Mon, 2019-04-01 18:15

  • The contribution cannot be assigned to 2017 as the deadline for doing that was 4/15/2018. I assume that Schwab did not issue a 5498 in May, 2018 reporting a 2017 contribution, but it is worthwhile to verify since contributions made in the first 3.5 months of the year are sometimes not recorded for the year initially indicated. 
  • For 2019, if some earned income has already occurred, a contribuiton could certainly be made now and then topped off later when the earned income reaches 6000.  Of course, if there is a good chance of reaching that, the entire contribution could be made now, but if the income falls short, the excess amount would have to be removed with earnings.  Therefore, contributing up front depends on much they want to avoid a corrective distribution of any excess.

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