Can I Change My IRA Contribution Year?

Question: I contributed $6,000 to my recently opened Roth IRA account. I did not know that I could still contribute for 2019, so my contribution was made for 2020. Can I withdraw my contribution and deposit it back into the account for 2019? If I did this, would my contribution limit for 2020 reset, or will I still be at the limit?”
– Jason B. in Missouri

Laura Adams, author, and host of the Money Girl podcast responds…

Thanks for your question, Jason! When you contribute to your IRA between January 1 and April 15, you have the option to deposit funds for the prior or the current tax year. If you’re not paying close attention when you make the transactions, it can be easy to make a mistake.

For 2020, the window of time when you can contribute to either the previous or the current tax year will be extended. Due to coronavirus economic reforms, the 2019 federal income tax filing deadline is postponed from April 15 to July 15, 2020. That means you also have until July 15 to make 2019 retirement contributions to a traditional IRA, a Roth IRA, or a SEP-IRA. That gives you more time than usual to correct a contribution error.

To change an IRA contribution, contact your account custodian and explain the situation. They should be able to change the contribution year without you having to withdraw and redeposit your funds manually.

Since Roth IRA contributions are made on an after-tax basis, changing the contribution year won’t affect your income taxes. So, it won’t matter if you have or haven’t already filed taxes for the previous year.

However, changing traditional, pre-tax IRA contributions can be more complicated. If you already filed your tax return, you’d need to file an amended return to include the contributions. But if you haven’t already filed taxes, be sure to include the correct amount, so you get the tax deduction that comes with making traditional IRA contributions.

Making an IRA contribution correction doesn’t affect your contribution limits. So, Jason can max out an IRA for 2019 and 2020. The limit is the same for each year: up to $6,000 if you’re under age 50, and $7,000 if you’re older.

The contribution limits apply to a traditional IRA, a Roth IRA, or a combination of both types. For example, if you’re under age 50, you could contribute $3,000 to a traditional IRA and $3,000 to a Roth IRA, or any proportion you like. Maxing out a retirement account each year is one of the best ways to build wealth and security for your future.