Time is ticking by! Here are important retirement account deadlines you don’t want to miss.
• Recharacterize 2017 Roth IRA Conversions
Did you convert a traditional IRA to a Roth IRA in 2017? If you think you may want to recharacterize your account(s), don’t let October 15 slip by.
If your account has declined in value, a recharacterization might make sense. You may also consider recharacterizing 2017 conversion and reconverting in 2018 to take advantage of lower tax rates put in place by the Tax Cuts and Jobs Act (TCJA).
TCJA eliminates recharacterization for Roth conversions done in 2018 or later. Clients who converted in 2017 are the last ones who will be able to take advantage of this rare opportunity in the tax code. Don’t miss out by missing the deadline!
• Recharacterize 2017 IRA Contributions
Are you having second thoughts on a traditional or Roth IRA contribution? Perhaps you made a 2017 Roth contribution and have discovered that your income is too high or just realized it is not deductible. Recharacterization may be just the solution. A traditional IRA contribution can be recharacterized to a Roth IRA or vice versa. For example, a 2017 traditional IRA contribution is not deductible can recharacterize that contribution a Roth IRA.
While the TCJA has eliminated recharacterizations for conversions beginning in 2018, recharacterizations of contributions remain available. Don’t overlook this valuable strategy and be sure to get it done by the deadline.
• Withdraw 2017 IRA Contributions Without Penalty
If you made an excess contribution to your IRA for 2017, you can catch a break when it comes to penalties. If you remove the excess contribution, plus the net income attributable by October 15, 2018, you will not be hit with a 6% excess contribution penalty. If you miss this deadline, there is no relief from this penalty. Be sure these transactions get done in time.
Before October 15, 2018, you can also remove any IRA or Roth IRA contribution that you may have changed your mind about for any reason. This applies if it is an allowable contribution and not an excess. After this date, this is no longer an option and the contribution must stand.
• Establish and Fund a SEP IRA Plan for 2017
The deadline for both establishing and funding a SEP IRA plan is the business’ tax-filing deadline, including extensions, This makes October 15, 2018 the deadline for 2017 for those businesses with extensions to that date. This is different than the deadline for contributing to a traditional or Roth IRA. That deadline is the tax-filing deadline, not including extensions.
• Make 2017 Employer Contributions to SIMPLE IRA Plan
Employer contributions to a SIMPLE IRA plan must be made by the business’ tax-filing deadline, including extensions. If the business has an extension until October 15, 2018 to file its 2017 tax return, that would be the deadline to make the employer contributions to the SIMPLE IRA plan.
• Bonus! October 31, 2018 is another important deadline for retirement accounts
This is the deadline for a trust that inherited an IRA in 2017, to provide required trust documentation to either the IRA custodian or the plan administrator. This may sound like mere paperwork, but it is critical.
If a trustee misses this deadline, the trust will not meet the look-through rules and the advantageous tax treatment of the stretch will be lost for trust beneficiaries. Advisors will not want to miss this deadline.