Can I file early and use refund for last year's IRA contribution?

Question

I'm in the odd position this year of expecting a large tax refund (>$10K). I also have not maxed out my 2015 IRA. Lastly I don't have a ton of extra money on hand and don't expect to before April (A large percentage of my annual salary comes at the end of May).

Given these facts, which I believe are true:

• One can contribute to last year's IRA until April 15
• Fidelity doesn't send the IRS info about your contributions until some time in May
• One can file taxes early (January) and get the rebate hopefully very quickly if one files electronically

Can I file my taxes right away, filling in the IRA contribution amount at the amount I expect to contribute but have not yet done, then get my tax rebate and use that money to contribute to my 2015 IRA some time before April 15? Assume that I cannot make this contribution amount without the refund.

Any gotchas I haven't thought of? I've never filed early before so I'm not sure what the probability of not getting your refund quickly is.

Answer 1

Your strategy is well thought out. Others use it same as you, to fund an IRA in the prior tax year with that year's refund.

Gotcha? Forgetting to send in the money on time. Or not correctly identifying the tax year for the deposit.

I know st**f happens, but I'd try to not get such a large refund in the future, better the money be in your pocket/account than Uncle Sam's. But your question implied an unusual event, so this advice may be moot.

Per Brick's comment below - be sure your MAGI isn't above the level where you can deduct the IRA deposit. That would create an odd situation, but since you are doing the return first, it's a matter of just confirming this on the return.

Answer 2

Yes. In fact, it's explicitly mentioned in Publication 590-A that you can file before making the contribution, as long as you make the contribution before the deadline.

Filing before a contribution is made. You can file your return claiming a traditional IRA contribution before the contribution is actually made. Generally, the contribution must be made by the due date of your return, not including extensions.

Answer 3

• File your taxes without the IRA contribution.
• Get your refund.
• Make the IRA contribution.
• Rewrite your 1040 to include the new contribution.
• File a 1040X to amend your original 1040, using numbers from the rewritten 1040.

I do not recommend filing your taxes claiming an IRA contribution that you never made -- for the same reason I do not recommend kiting checks (which is fraud by the way).

There's too much room for something to go wrong. IRS does not owe you the refund by April 15. If you don't get your refund in time, if it slips through the cracks, check is lost, bank transfer is botched, some identity thief already filed for your refund, who knows what might delay your refund? But there you are on April 15 without the cash on hand to fund the IRA you promised to fund. Now you've got tax problems, you must pay additional tax without the funds to do it.