Updated April 24, 2024
Overview
Individual retirement account (IRA) owners have deadlines by which many IRA related “actions” must be completed. Furthermore, IRA custodians/trustees have deadlines to complete reporting. Transactions subject to a specific deadline include making an IRA regular contribution, removal of an excess or unwanted regular contribution, recharacterization of a prior year regular contribution, and completing a rollover or conversion after taking a distribution. A federally declared disaster area designation can provide relief (i.e., an extended deadline) to affected taxpayers, allowing them to complete certain transactions by a later specified date. Extending the deadline by which an IRA custodian or trustee must file certain reports, such as Internal Revenue Service (IRS) Form 5498, IRA Contribution Information, is also included in the relief provided by the IRS.
Examples of extended deadline relief
The deadline for an IRA owner to make an IRA regular contribution is his/her tax-filing due date, excluding extensions. For 2023 this deadline was April 15, 2024. The deadline by which an IRA custodian or trustee is required to file its 2023 Form 5498s with the IRS and provide it to IRA owners and beneficiaries is May 31, 2024.
Example 1: Barbara, age 48, wanted to make a $7,000 traditional IRA regular contribution for tax year 2023. Under normal circumstances, Barbara would have been required to make this contribution by April 15, 2024, her 2023 tax filing deadline. However, because Barbara is a resident of a county in Maine that was declared a disaster area due to severe storms and flooding beginning on January 9, 2024, she has until July 15, 2024, to make her 2023 IRA contribution.
Example 2: Barbara, from example 1, has an IRA with ABC Bank. Utilizing the disaster declaration extension, Barbara contributes $7,000 for 2023 to her traditional IRA with ABC Bank on June 14, 2024. How will ABC Bank report this contribution? ABC Bank is an IRA custodian and located in a Maine county that was declared a disaster area due to severe storms and flooding beginning on January 9, 2024. As a result, ABC Bank has an extended deadline of July 15, 2024, to file its 2023 IRS Form 5498s with the IRS and provide copies to IRA owners and beneficiaries. However, ABC Bank will only report IRA regular contributions for 2023 made by IRA owners through April 15, 2024, in addition to other various contributions (e.g., rollovers, conversions, etc.) made to IRAs during 2023. Because the contribution Barbara made on June 14, 2024, was for 2023 but was made using a disaster declaration extension, it is considered a postponed contribution for 2023 and will not be reported on a 2023 IRS Form 5498. ABC will collect deposit documentation from Barbara indicating the deposit type as a postponed contribution, the tax year for which it was deposited (2023), and a reason code of why the contribution was postponed. In this case the reason code is ‘FD’ due to the postponed contribution relating to a federally designated disaster area. This postponed IRA regular contribution will report in boxes 13a, b, and c of Barbara’s 2024 IRS Form 5498. See the IRS Instructions for Forms 1099-R and 5498 for more information.
Example of rollover relief
Susan took $40,000 from her IRA on January 4, 2024. She was planning to roll the distribution back into an IRA within the 60-day time-period (i.e., by March 4, 2024). As a resident of a county in Maine that was declared a federal designated disaster area due to severe storms and flooding that began January 9, 2024 Susan has through July 15, 2024 to complete a rollover.
Conclusion
IRA custodians and trustees are not responsible for determining if someone is an affected taxpayer under disaster relief. However, with the many disaster declarations already made this year, understanding the rules and requirements to properly document and report various related transactions is a primary responsibility for IRA custodians and trustees.
For an opportunity to learn more about IRAs and other tax advantaged accounts including Health Savings Accounts and Coverdell Education Savings Accounts, consider the Wolters Kluwer IRA Library or on-demand video training offered on a variety of topics. Go here to learn more about training opportunities available to you, or you can call us at 1-800-552-9408.
