How do I correct an error on my 2004 and 2005 taxes?

Question

In April of 2005, before the tax deadline I put $3000 into an IRA through ameritrade and claimed that on my 2004 taxes. In April of 2006, I did the same thing but with the increased $4000 cap. Apparently ameritrade requires a slip to be mailed in to say to which year the contribution is supposed to go. Without the slip these contributions went to the calendar year they were bought in and not the previous years as allowed. So yesterday when I went to max my contribution for 2006 I saw that it was already maxed. How do I go ahead and fix this now before the penalties start accrueing. Ameritrade says they can back up $900 but that doesn't fix the problem.

It was an honest mistake and I have nothing to hide, but years of being forth coming and honest have taught me sometimes its best to keep my mouth shut.

Answer 1

It's not an Ameritrade rule that you have to state what year an IRA contribution is for. No matter who you deal with, a contribution is designated for the current year unless you let them know differently, so no surprise that they didn't get set up for the previous year. Every article, by the IRS or otherwise, than I've ever seen noting that you can make contributions for the previous year up to the tax deadline includes a line something to the effect of "be sure to tell the IRA trustee that your contribution is for the previous year."

You must have gotten some kind of confirmation on your contribution. OK, you probably overlooked the year they were set up for, didn't do it deliberately, but you're probably still out of luck since so much time has passed. You could call the IRS and ask them if you can retroactively change the year the contributions are designated for, but I wouldn't think you' would have much success.

At the end of 2005, the form you got for your IRA contribution for your taxes should have said $3000, not $4000 - that should have triggered you to look at what had happened. If you claimed the full $4000 anyway on your 2005 return, even though the Ameritrade form said $3000, the IRS might very well notice this - I'm not sure that they've completed verifications yet of 2005 returns.

If you just do nothing, but accept that you can't make another contribution for 2006 since the one you made a year ago shows as maxing your allowed amount for this year, nothing will happen unless the IRS catches up to the discrepancy -if they do, you'd likely be penalized, both for 2004 when you claimed a deduction for a contribution that was not properly made, and for 2005 when you claimed too much - but then you would be able to claim the more recent contribution for your 2006 return. But you wouldn't be able to make another contribution now, except of course for 2007.

The legal way to handle this would be to amend your 2004 return removing the IRA deduction, and amend your 2005 return changing the amount to the $3000 that's on the books for that year, and pay the extra taxes, with interest and probably penalties. Then you'd claim the contribution you made a year ago on your 2006 return.

Good luck. And next time, read any confirmation paperwork very carefully.

Answer 2

Not only Ameritrade but every company that sells IRAs requires that you inform them in writing which year you want the contribution credited. You will need to amend your 2004 and 2005 returns if you want to correct that with the IRS. If they have not sent you any notice by now for the 2004 return they may not have caught the mistake. If you do decide to make the correction you would have no contribution in 2004,
$3000 in 2005 and $4000 in $2006. You could go some place else and get a 2006 IRA and the entire thing may just go away.

Answer 3

"What costs Qualify The lifetime gaining awareness of credit is in step with qualified practise costs you pay for your self, your companion, or a based for whom you declare an exemption on your tax return. commonly, the credit is authorized for qualified practise costs paid in 2005 for an academic era beginning in 2005 or interior the 1st 3 months of 2006. as an occasion, in case you paid $a million,500 in December 2005 for qualified training for the Spring 2006 semester beginning in January 2006, you're arranged to apply that $a million,500 in figuring your 2005 credit." it truly is going to be what you PAID. i might argue which you will take the decuction this 3 hundred and sixty 5 days. purely have receipts etc. examine e book 970 (see link) approximately Lifetime gaining awareness of credit.