October 15, 2025 is the deadline for individuals to file their 2024 federal and state income tax returns. It is also the deadline for individuals to correct 2024 IRA contributions and avoid the IRS 6 percent IRA excess contribution penalty. This column discusses both deadlines and what affected employees and retirees need to do to meet the deadline and avoid penalties.
Filing 2024 Income Tax Returns by the Deadline
Those federal employees and retirees who requested a six-month extension to file their 2024 federal income tax return must file their 2024 return by midnight October 16, 2025. The following are a few reminders that extension filers should note as they prepare to file their 2024 federal income tax returns:
1. File electronically. Individuals are advised to file electronically and choose direct deposit for their refund. Direct deposit is the fastest and safest way to receive the deposit. Those individuals who live in federal disaster areas may have more time to file. Information on the most recent tax relief for disaster situations is available on the IRS website.
2. IRS Free File. Many individuals can e-file their return for free through IRA Free File. IRS Free File is safe and easy (and perhaps free if the filer qualifies). To Free File, the filer must have an adjusted gross income of less than $84,000. Using IRS Free File guided tax preparation to file electronically can also help individuals determine their eligibility for many valuable tax credits.
3. No penalty with no balance due. Individuals who file their 2024 income return and who either expect a refund or do not owe will not be penalized. This is the case even if an individual did not formally file a 2024 filing extension. However, the IRS shuts down electronic filing for filing 2024 tax returns on October 16, 2025. That means any return filed post-October 15,2025 will have to be filed via a paper tax return.
Correcting (Recharacterizing) a 2024 IRA Contribution
A recharacterization is a transaction that allows an IRA owner to “undo” a deductible traditional IRA contribution or “undo” a Roth IRA contribution and therefore treat it as a contribution to the opposite type of IRA. An IRA owner is permitted to recharacterize 2024 IRA contributions, up to the $7,000 contribution limit ($8,000 if over age 50 and therefore eligible to make a catch-up contribution of $1,000). All eligibility requirements for contributions to either type of IRA apply. The deadline to recharacterize 2024 IRA contributions is October 15, 2025. This assumes that the IRA owner files his or her 2024 federal income tax return in a timely fashion with or without an extension.
What Are Two Reasons for Recharacterization a 2024 IRA Contribution
The following are two reasons a federal employee or a retiree may need to recharacterize a 2024 IRA contribution:
1. A federal employee or retiree discovers that his or her traditional IRA contribution is not deductible because his or her adjusted gross income is too large, and the federal employee (and spouse, if married) is participating in an employer-sponsored retirement plan during 2024.
2. A federal employee or retiree leans that his or her 2025 adjusted gross income is too large to contribute to a Roth IRA.
In both situations, a federal employee or retiree made a 2024 IRA contribution between January 1,2024 and April 15,2025 and realizes that the contribution has to be recharacterized.
How to Recharacterize an IRA Contribution
A recharacterization of an IRA contribution must be processed through a direct transfer of funds between financial organizations. If the recharacterization is done entirely within one financial organization, by IRS rules the IRA owner cannot receive the funds to be recharacterized. The transfer of funds (includes the contributions and accrued earnings) from the first IRA (where the IRA contributions were originally made) to the second IRA has to be a direct transfer.
The direct transfer of funds must be completed by midnight October 16, 2025. The IRA owner must make an irrevocable elections to recharacterize a contribution. The election to recharacterize a contribution is made when the IRA owner notifies the financial organizations involved that he or she is electing to treat the contribution made to the first IRA as if it had been made to the second IRA) .
The election notification must include: (1) The contribution type (Roth or Traditional) and the dollar amount being recharacterized; (2) The date on which the contribution was made to the original IRA: (3) The year for which the contribution was made; (4) Instructions to the financial organization holding the distributing IRA to move funds to the receiving IRA; (5) The names of the organizations, if different, holding the two IRAs; and (6) Any additional information needed to complete the recharacterization.
Reporting a Recharacterization
Federal employees or retirees who recharacterize a contribution to one kind of IRA (Roth or non-Roth) as a contribution to another type of IRA must report the recharacterization on their federal income tax return as directed by IRS Form 8606 (Nondeductible IRAs) and it’s instructions may be downloaded:
• Traditional IRA Contribution is Recharacterized. In this situation, an individual recharacterizes some or all of the traditional IRA contribution to a Roth IRA. This is also known as a backdoor Roth IRA conversion. If only part of the contribution is recharacterized, the nondeductible portion (if any) of the remaining traditional IRA contribution is reported on IRS Form 8606, Part I. If the entire contribution is recharacterized, none of it is reported on IRS Form 8606. In either case, the IRA owner should attach a statement to the 2024 federal income tax return explaining the recharacterization.
• Roth IRA Contribution is Recharacterized. If an individual makes a contribution to a Roth IRA and later recharacterizes some or all of it to a traditional IRA, then the contribution portion to the Roth IRA is reported on IRS Form 8606, Part I. If the entire Roth IRA contribution is not recharacterized, then the individual should not report the portion of the Roth IRA remaining in the Roth IRA on IRS Form 8606. A statement should be attached to the 2024 federal income tax returns explaining the recharacterization.
The following table summarizes the reporting of a recharacterization for a 2024 IRA contribution.
Reporting a Recharacterization
Note that if an IRA contribution recharacterization is performed and reported correctly, then there should be no immediate tax consequences to the IRA owner.