March 2021

Additional Discussion of Reporting alternatives for Prior Year Postponed Contributions

The individual will instruct you on an IRA contribution form the “prior” year or years for which he or she is making the postponed contribution(s). The individual must designate the IRA contribution for a prior year to claim it as a deduction on the income tax year.

Postponed contributions may be made by individuals who have served in a combat zone or hazardous duty area or individuals who are “affected taxpayers” due to federally designated disasters.

If the IRA custodian will report the contribution made after April 15 and the individual designates a contribution for a prior year, then the IRA custodian must prepare either (1) a Form 5498 for the year for which the contribution was made or (2) on a Form 5498 for a subsequent year.

Under approach #1, the IRA custodian may choose to report the contribution for the year it is made. For example, if an individual in September of 2018 designated a contribution of $5,500 to a traditional IRA for 2016. The IRA custodian could choose to prepare a 2016 Form 5498 and report the $5,500 contribution in box 1. If the IRA custodian had not prepared a 2016 Form 5498 for this individual, the IRA custodian then would prepare an original 2016 Form 5498. If the IRA custodian had previously prepared a 2016 Form 5498 for this individual, the IRA custodian then would prepare a “corrected” 2016 Form 5498.

Under approach #2, the IRA custodian is furnished a contribution after April 15, the IRA custodian may choose to report it on that year’s Form 5498 even though designated for a prior year.

The amount of the contribution must be reported in box 13a and the year for which the contribution was made in box 13b and in box 13c the applicable code according to the IRS instructions.

If you report the contribution Form 5498 in a subsequent year, you must include the year for which the contribution was made, the amount of the contribution, and the applicable indicator.

Definition. An individual who is serving in or in support of the Armed Forces in a designated combat zone or qualified hazardous duty area has an additional period after the normal contribution due date of April 15 to make IRA contributions for the prior year. The period of time is the time the individual was in the designated zone or area plus at least 180 days.