April 15 has come and gone. For some, the days and weeks leading up to this date were full of anxiety and dread. Others may have filed their tax returns many weeks ago. And still others may have gotten filing extensions to stop the immediate stress—while perhaps prolonging the filing burden. Whatever your situation, this is a good time of year to consider certain actions that may still affect your 2025 tax situation or that may put you in a better position for 2026.
Contribute By April 15, But Report It Later
Requesting a tax filing extension does not give IRA owners more time to make contributions for the prior year. April 15 is the usual tax filing date, and IRA carryback contributions cannot be made after that date. But individuals with an October 15 filing extension can make a Traditional or Roth IRA contribution by that April 15 deadline—while reporting this transaction when they file their return later in the year.
Example: Frank has earned income for 2025 and so is eligible to make a Traditional IRA contribution. But Frank does not yet know—based on his income and on having a retirement plan at work—whether his contribution is deductible. As long as Frank makes the contribution by April 15, the details can be sorted out later on, when he files his tax return by October 15.
For those who are not sure about whether their Traditional IRA contribution will be deductible, making the carryback contribution by April 15 preserves options. If it turns out that an IRA owner is eligible for a deductible contribution, the tax return—filed after the contribution is made—must simply reflect the proper deductible amount. If it turns out that the contribution is not deductible, the IRA owner can file IRS Form 8606 to indicate that a nondeductible contribution has been made. Alternatively, the deposit can be removed as an excess contribution by October 15, along with the net income attributable (NIA) to the excess. In this case, the tax return for the previous year will reflect only the NIA as taxable income.
Other IRA Actions to Consider
Recharacterizations Can Fix Contributions Retroactively
IRS rules allow IRA owners to recharacterize either Traditional or Roth IRA contributions. This mechanism treats a Traditional IRA contribution as a Roth IRA contribution—or vice versa. By allowing a taxpayer to treat a contribution to one kind of IRA as if it had been made to another kind of IRA, the IRS encourages IRA contributions generally, while preserving assets in IRAs instead of requiring certain contributions to be removed as excess contributions.
Example: Isabel made a $7,000 Traditional IRA contribution early in 2025. In April 2026, her tax preparer told Isabel that she earned too much to qualify for a tax deduction on this contribution. Izzy has three options.
- She could keep the contribution in a Traditional IRA and use Form 8606 to tell the IRS that it is a nondeductible (or after-tax) contribution.
- She could remove the contribution as an excess by October 15, 2026.
- She could recharacterize the deposit as a Roth IRA contribution (assuming that she’s eligible), moving both the contribution and the associated earnings into a Roth IRA.
The recharacterization process gives IRA owners the option of keeping assets in an IRA instead of removing them as excess contributions. In addition, the income earned in the original IRA goes with the contribution when it is moved to the other IRA. This way nothing is lost, and the IRA owner has the benefit of the same earnings that would have been available had the contribution been made to the proper IRA.
Conversions Are Not Just For Tax Time
Conversions are used to move assets from a Traditional IRA to a Roth IRA. Until 2010, taxpayers who exceeded $100,000 in income were not allowed to convert assets at all. Once this limitation was removed, many more people began to take advantage of this opportunity to gain additional tax-free earnings in Roth IRAs. Another outgrowth of this rule change was the “back-door Roth IRA.” In this scenario, taxpayers make a current-year nondeductible contribution to a Traditional IRA and then convert it to a Roth IRA. This allows those who are not eligible for a Roth IRA because of their income to get money into a Roth IRA by first making a Traditional IRA contribution. What they cannot do directly, they do indirectly . . . through the back door.
Although the back-door Roth concept gets a lot of attention—and can work well for some individuals—conversions can also be used to systematically move Traditional IRA assets on a larger scale. Instead of merely converting each year’s annual contribution, some people are able to convert bigger blocks of assets and pay tax on the converted Traditional IRA dollars. Retired IRA owners, for example, may find that they are in a lower marginal tax bracket. This may allow them to convert significantly more while still paying tax at a lower rate than while they were working full time. In particular, some self-directed IRA owners find that the long-term benefits of tax-free earnings outweigh the down side of paying taxes on the converted amounts.
Don’t Wait Till Tax Time to Consider Your Options
Why wait until April to make an IRA contribution for the previous year? Why not contribute this April for the current year. You can always remove the contribution (as an excess) if you need to. Or you may decide that a recharacterization is the best move if your original contribution went to the wrong type of IRA. As always, seek sound professional advice that is right for your unique situation. And whatever tack you decide on, know that Mainstar Trust will be able to process your requests quickly and effectively.