IRA deduction

[B21]

Does anyone have any guidance regarding a situation where a client took an IRA deduction on his 2012 tax return, made the contribution by check prior to the 4/15/13 deadline & then the check was subsequently returned for insufficient funds after the 4/15/13 deadline. Is the deduction disallowed for 2012 even if the check was eventually made good?

[ETA Consulting LLC]

I'd doubt you'd find any guidance on that one. Typically, when something occurs enough, the community will begin to ask questions; and the IRS will eventually take up the issue and give guidance. Until then, you merely have the written rules and regulations that do not anticipate this type of event happening.

We know that the funding for such IRAs must merely be postmarked by the April 15th deadline. Hence, when scrutinizing the contribution, I'd imagine the IRS would look at the date of deposit in proximity to that date. Better yet, the IRS may rely heavily on the Form 5498 produced by the Custodian; so the real question may be would the custodian agree to accept that funding for 2012 and issue a Form 5498 to that extent.

I'm not sure if you could get something more definitive than that, but merely a few thoughts.

Good Luck!

[B21]

That's a good point regarding Form 5498. I'll explore further. My initial inclination is to say that the taxpayer would not receive credit for a timely deposit if the check did not clear.