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Level 1

I made an IRA deposit on April 15th, but the transfer was cancelled by the bank. Will I end up with a penalty once I amend my return?

I opened an IRA account on April 15th attempting to transfer funds from my bank account.  I mistakenly used an account the bank had closed, and so the transfer was rejected.  I now need to file an amendment to remove the $3000 IRA contribution.  Will there be a penalty?  Any other ramifications?

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Level 20

I made an IRA deposit on April 15th, but the transfer was cancelled by the bank. Will I end up with a penalty once I amend my return?

Possibly.  If you owe tax when you amend, and it is after April 15, you may owe 0.5% penalty and 0.5% interest per month on the amount you owe.  For a $5000 IRA, you probably will owe $1250 in extra tax, so $26 penalty plus interest if you amend and pay before May 15, $52 if you amend after May 15 but before June 15, and so on.

You can also request a penalty waiver if this is your first time with a penalty, but the interest can't be waived by law.  Don't pay a penalty with your taxes when you amend even if Turbotax offers.  Wait to get billed.


Abatement https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief-due-to-first-time-penal...