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fshay1 · Oct 5, 2006, 09:28 AM

HELP! I just got a letter from the IRS about my 2004 tax return. I listed my $3000 IRA deposit on the return but I honestly forgot to make the deposit. They want 832 dollars! A few questions:

1. Is there any way to make a post dated deposit since I forgot to do it?

2. Should I just pay it or should I try to negotiate it down?

3. Is there any other legal way to get out of paying this? Don't get me wrong, I believe in paying my share... and did... but this was a genuine mistake.

Thanks in advance!

AtlantaTaxExpert · Oct 6, 2006, 09:13 AM

There is NO legal way to make the IRA deposit for 2004 at this late date. Once April 15, 2005 came and went, you lost your only opportunity to fund your IRA for 2004.

Just pay the taxes and try to do better next time!

RickJ · Oct 6, 2006, 09:27 AM

ATL, can he not amend the '04 return?

ScottGem · Oct 6, 2006, 09:59 AM

Rick, he CAN amend the '04 return to remove the deposit, but that still means he owes the tax. Essentially what I think happened is he claimed that he made a deposit into an IRA of $3K. This reduced his taxable income so he owed less. But the IRS checked the IRA and found he didn't make the deposit. So they negated the deposit, refigured his tax, maybe adding interest and/or penalities and billed hm for the $832. So amending the return doesn't remove the liability.

What I would do is make an appointment with an IRS examiner and discuss your options. Maybe they will let you deposit the $3K and offer a settlement of the amount owed. Maybe they won't, but it doesn't hurt to ask.

To answer your three questions; 1) No. 2) see above, 3) No, you owe the tax. You may be able to either avoid the tax by depositing the $3K, but you would probably have to pay interest and penalities Or you can pay the tax and maybe negotiate off the interest and penalites.

AtlantaTaxExpert · Oct 6, 2006, 11:15 AM

Unfortunately, the law is very clear on this point.

April 15, 2005 was the absolute last day you could make a desposit to your IRA for 2004.

Sometimes, extenuating circumstances allows an extension, but simply forgetting to make the deposit does not qualify.