Don’t Get Tripped Up by Tricky IRA Deadlines
By Mary Hopkins, CISP, CHSP
There are many deadlines to keep track of throughout the year. Although it’s generally up to clients to track these deadlines, they may come to you for guidance. This article will cover some common questions surrounding certain IRA-related deadlines.
What is the IRA contribution deadline?
Except in certain disaster and military service situations, most individuals must make a regular IRA contribution by their tax return due date. The 2023 federal tax return deadline is generally April 15, 2024. But this isn’t the case for everyone. For example, residents of Maine and Massachusetts have until April 17, 2024, to file their 2023 income tax returns because April 15, 2024, is Patriot’s Day and April 16, 2024, is Emancipation Day.
Is there a rollover contribution deadline?
Individuals generally have 60 days to complete an IRA-to-IRA rollover or to complete an indirect rollover from a retirement plan to an IRA. This 60-day limitation does not apply to direct rollovers from retirement plans. After 60 days, the rollover cannot be completed unless the IRA owner qualifies for an extension. Day one of the 60-day rollover period begins the day after the individual receives the distribution.
Does an IRA excess contribution need to be corrected by April 15?
IRA owners remove or recharacterize excess contributions by their tax return due date, plus extensions. If a taxpayer files his tax return timely, the IRS provides an automatic six-month extension from the tax return due date (generally October 15).
As a reminder, taxpayers can contribute 100 percent of their eligible compensation, not to exceed $6,500 for 2023 and $7,000 for 2024. Individuals age 50 or older can contribute an additional $1,000 as a catch-up contribution. This limit is per taxpayer and not per IRA so if they contribute to both a Traditional and Roth IRA, the amount would be aggregated.
What is the contribution deadline for employer SEP and SIMPLE IRA contributions?
Employers have until their business’ federal tax return due date, including extensions, to deposit employer SEP and SIMPLE IRA contributions. Financial organizations must report SEP and SIMPLE IRA contributions for the year in which the contributions are made. For example, if an employer makes a 2023 SEP contribution on March 5, 2024, the financial organization must report the contribution on the 2024 Form 5498.
When are individuals required to take distributions?
Traditional and SIMPLE IRA owners must begin taking required minimum distributions (RMDs) by April 1 following the year that they reach RMD age. This date is called the required beginning date (RBD). IRA owners must take all subsequent RMDs by December 31 each year. If an IRA owner does not distribute her RMD in the year of death, then the beneficiary must distribute the required amount by the end of the year. IRA owners and beneficiaries who fail to take a required distribution may owe an excess accumulation penalty tax.
NOTE: The proposed RMD regulations would automatically waive the excess accumulation penalty tax as long as the beneficiary satisfies the year-of-death RMD by his tax return due date, including extensions.
Most beneficiaries must generally begin taking distributions by December 31 of the year following the IRA owner’s death if they are subject to an annual distribution requirement. Spouse beneficiaries of IRA owners who died before the RBD may be able to delay taking distributions until December 31 of the year that the IRA owner would have turned age 72 (age 73 for IRA owners born in 1951, or later).
