When filling out your tax return, it’s allowable to deduct the amount of your regular IRA contribution when filing even though you may not have already made the contribution.
You’re allowed to make an IRA contribution for tax year 2015 up to the original filing deadline of your tax return. This year, that date is April 18, 2016.
The problem is that sometimes we file the tax return way early in the year, and then we forget about the IRA contribution. As of the posting of this article, you have 1 week to make your contribution to your IRA to have it counted for tax year 2015.
What To Do If You Miss the Deadline
If you don’t make the contribution on time, you’re in for some nasty surprises unless you take some corrective actions.
If you find yourself on April 19, 2016 without having made your IRA contribution and you had deducted one from your taxes for 2015, you need to amend your return. This means that you’ll fill out a Form 1040X and eliminate the IRA contribution that you originally deducted from your income. This will (most likely) result in additional taxes that you’ll owe, so when you send in the amendment you’ll have to send an additional tax payment.
Failure to amend your return in a timely fashion will result in the IRS contacting you later, requiring you to pay the additional tax plus interest. In addition, since your tax return was erroneous, the IRS will consider this to be “under-reporting of income” and “under payment of tax” – both of which carry penalties. Even if it was an honest mistake, you’ll owe these penalties.
You may even owe some penalties and interest if you file your amendment right away, since technically you’ve under-reported and underpaid. But if you amend as soon as you can, these penalties and interest should be minimized.
Sterling Raskie, MSFS, CFP®, ChFC®
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