Client funded an IRA prior to trhe deadline and just recieved the checks back because he forgot to fill out the checks completly. The IRA co said that they could not fund the IRA for 2006. Would you recommend to amended the tax return or would you plead with the IRA co. and see if they will back date the IRA funding. Any help is appriciated.
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To me it seems like substance over form. I mean the client tried to make the IRA contribution on time. If he/she were my client and I was the financial planner I would call the company and beg for them to code the contribution as a 2006 ira. If that does not work then the client or his/her broker could threaten to walk and take there money else where.
If all the begging in the world does not work then yes I would amend the return. -
bounced checks
>>substance over form<<
The substance of this transaction was that the money did not transfer. It wasn't just a poor paper trail. Writing a valid check isn't very complicated, and the taxpayer didn't even do that. He had a year and a quarter to do it, and he put it off and put it off and eventually tried to float a bad check. Now he wants someone else to cover for him.
To get the tax benefit he has to follow the tax benefit rules. If he doesn't like the way his IRA custodian follows those rules, he can change to another bank--if he can find one that doesn't mind bounced checks.Comment
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Oh Jainen always the letter of the law for you. The fact is that real life is not always black and white. There are shades of gray. My first hand knowledge tells me that most custodians if pressed hard enough will code the contribution to the clients favor. You don't want to go the extra step for your client then don't but not all of us are willing to put the "baby out with the bath water". Clients do stupid things sometimes just as I or you or any human does. And because the client made a stupid mistake you advocate casting him aside and not at least trying to resolve the issue.
I agree waiting to the last second is stupid but still I think you owe it to the client to at least try.
If after trying to resolve it nothing can be done then sure amend away. Just my humble advice.Comment
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Try and deal with the IRA company and argue with them if required. It isn't likely they will change their minds but if you've shown an attempt to make a contribution, many will accept it and will post date the contribution as of a particular date. I is a very easy thing for them to do.
This is one of those instances where working with a broker you can visit and talk with in person is SUCH a good idea.Comment
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something they like
>>a very easy thing for them to do<<
It is not an easy thing. Banking in the United States is perhaps the most regulated industry on earth. Forging dates is not something they like to do.Comment
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