Managing Your Money

It’s “crunch” season for IRA contributions

Every year in the few weeks before taxes are due many taxpayers make last-minute IRA contributions. IRA custodians get inundated with contributions in the last weeks before April 15th, which can mean delays in having your contribution credited to your account. If you want to make sure your contribution gets into your account on time be sure to follow your custodian’s procedures and deadlines. Here are some tips that apply to both traditional and Roth IRAs.

•Put the tax year of the contribution on your check, along with your account number. If the contribution is not clearly designated as a 2010 contribution (a “prior year” contribution) it will be processed as a current year 2011 contribution.

•If you contribute via an electronic funds transfer be sure to contact the custodian to have contributions made this calendar designated correctly as prior year contributions.

•Contact the custodian to find out their deadline for receiving prior-year contributions. They may allow checks sent by mail to be postmarked on April 18th, 2011. However if your check is received by the custodian after April 18th you may find that it is automatically coded as a current year contribution and you will have to have that corrected. To avoid this problem altogether make sure to send your check at least 10 days before the deadline. If you do send the check close to the deadline get a receipt from the post office.

•Journal money from a non-retirement account at the same custodian into your IRA. This takes a lot less time than sending a check, and you can replenish your non-retirement account after April 18th. Make sure you have enough cash in the account to cover the contribution amount. If you don’t you may have to sell a mutual fund or stock, so allow time for the trade to settle (usually within 3 business days.)

•If you contributed too much to your IRA you can have the excess amount returned to you (including earnings), but this must be done by the date you file your taxes for the contribution year (including extensions) to avoid an IRS penalty.

•If you made a Roth IRA contribution that you want to back out (called a “recharacterization”) the deadline is April 18th. Contact the custodian for the correct form and give the custodian plenty of time to process it.

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