Don’t miss the 2020 IRA deadline and cost yourself saving more for retirement.
In the haste of getting all your tax documents in order to meet with your tax preparer, don’t forget about making your IRA contributions for the 2020 tax year.
If you didn’t know, even though you haven’t opened an IRA account yet, you can still do so and still be eligible to make a contribution for 2020 – this applies both to traditional and Roth IRAs.
Taxpayers will have until Friday, April 15 to make their 2020 IRA contributions. Even if you are just now opening an account you want to contribute toward last year first. Once the deadline passes you cannot contribute for that tax year in the future.
Please note: just because you have until the 15th of April to add to your IRA, does NOT mean you should wait until the 15th of April. Let me give you a quick story to attest to that.
Client Story and IRA Deadline
I had a client that is notorious for waiting until the absolute last minute in making their IRA contribution. Learn more about Roth IRA rules here!
Two years ago, it was the same routine to where they’re scrambling to get me a check on the last day possible.
Luckily, they did make the deadline.
However, there was a bit of a problem……..
Apparently, the client had forgotten to transfer funds into the checking account from which they wrote the check for the IRA contribution and the check bounced. Guess what happens when you write a check for your IRA and it bounces? You don’t get a second chance.
Ultimately, since the check bounced, they were unable to make a contribution for that year. Had they come in much sooner, everything would have been fine.
Funny enough with that same individual, I went to them with
“Since you already have the money available now, why don’t we go ahead and make a contribution for this year so we don’t have to wait until next year and have a possible repeat occurrence?”
Although the client agreed with me, they still said they wanted to wait until later on. Guess what happened the following year?
You guessed it. The same exact thing: last minute contribution.
At least this time, the check cleared and they were able to make the IRA contributions for that year. Moral of the story is, don’t wait until the last minute. Although you have until the 15th of April, get it in there much, much sooner.
SEP IRA and Simple IRA Contribution Deadline
It should be noted that if you are a business owner and have either a SEP IRA or Simple IRA, your contribution deadlines differ. Typically, you have until the tax filing deadline of the business to get the employer contributions invested into the plan. With the Simple IRA, the employee’s portion that is deducted directly from their paychecks have to be in there within a reasonable time after the last pay period of year-end (think January 21st).
Where to Open an IRA?
If you haven’t opened an IRA but want to before the April 15th deadline there is still time. All you need to do is find a solid investment brokerage firm that will become the custodian (holder) of your IRA. Unfortunately, there are a lot of brokers to choose from out there and making a selection can be time-consuming.
Don’t worry, we’ve done the hard work for you. Check out our in-depth article on the Best Place to Open a Roth IRA. and consider Ally Invest (for those that are just starting and need help developing the habit of investing regularly).
Apparently, the client had forgot [forgotten] to transfer funds…..
Ultimately, since the check bounced, they were unable to make a contribution for that year. Had they came [come] in much sooner….
What if I miss the April 15th deadline for contributions to be made in the previous year after filing my taxes with the assumption of making the contributions? Is there a way to have them applied for previous year? Or do I have no choice but to amend my taxes? This is a hypothetical question btw.
Generally speaking, you can make the contributions as late as Oct 15 IF you filed for an extension. Otherwise you’ve missed the deadline. But you can check with a tax preparer to see if you can do an amendment.
Although I’m not a US citizen this is a great reminder… for those of us North of the boarder it is RRSP’s and the contribution deadline is March 1st 2013. Last year I missed doing a top up in time (thought I had a good return without the top up)… won’t make that mistake again!
Thanks for the reminder! Just added this to my to-do list (embarrassed that it somehow slipped off it this year).
The item probably in addition holds referencing that you might want to wait until eventually you’ve produced your last info for a IRA before you decide to document your taxes. I’ve read testimonies of men and women processing his or her taxes earlier and experiencing them to can down payment up to May 15 and being forced to document a amended duty come back to operate the correct total on the type.
Thanks for spinning my comment, Amy. You may want to work on your alternative words in your spinner though. Can’t really replace April 15 with May 15…
@ Shane Wow. I just glanced over the comment in haste today and didn’t realize how “spun” it was. Comment is still live, but the link has been removed.
It probably also bears mentioning that you want to wait until you’ve made your final contribution to your IRA before you file your taxes. I’ve heard stories of people filing their taxes early and then hearing that they could deposit up until April 15 and then having to file an amended tax return to use the correct amount on the form.
Yes, that’s right. I speak from personal experience. It happened to me last year and was far from pleasant.
Jeff – Is April 15th the date to make the transaction or the actual date the funds must be in the IRA account (assuming the check does not bounce). E.g Can I execute the transaction in my Vanguard account on Apr 15, but the funds most likely won’t get there till Apr 17.
I agree don’t wait till the last minute. But it sometime takes a while to get my fnal AGI figure for the previous year
@Andy You would have to double check with Vanguard on that one. I know with my company we do allow clients to deposit the money with us the day of, but it has to be in before a certain time of the day.
I have a SIMPLE IRA from a previous employer, but I am still self-employed. Can I make a contribution to my account without rolling over my money? Help! I’d like to try to do this before filing my taxes!!!
@Tara I’m really not sure of the answer. My hunch is that you would have to setup one up as a sole-proprietor since the first one was established by your previous employer. I would double check with a CPA.
You can try the Ed Slott forums: http://www.irahelp.com/forum/viewforum.php?f=1
It’s a free service that answers all questions pertaining to IRA’s.
A tax preparer did my taxes for 2006, 2007 & 2008 in which I had to pay money back. I was not advised to invest in an IRA to reduce those amounts. Is it too late now to do an amendment?