Discussion:Excess IRA Contribution
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Taxestaxes (talk|edits) said: | 1 April 2008 |
| Have a client who last year made a $5000 traditional IRA contribution. Her former taxpreparer told her to redesignate $2761 to 2007. Now in preparing her 2007, her income does not allow her to make a contribution (sched c, e & f result in loss and only other income is retirement). My question is can she redesignate this amount to 2008? Or does she need to withdraw contribution so she doesnt have to pay 6% penalty? Thanks. | |
Taxestaxes (talk|edits) said: | 1 April 2008 |
| Sorry, I had did a search, guess I used wrong combinations of words, because I refined my search and found prior threads that have helpes; however, can she redesignate this amount to a ROTH IRA and no penalty, etc.? | |
| April 2, 2008 | |
| As long as it's done before April 15th, I believe you can just keep on rolling.....
But you'll keep getting the Form 1099r's, with the earnings issue to deal with. | |
Taxestaxes (talk|edits) said: | 2 April 2008 |
| Sorry, she cant designate to ROTH , her income doesnt allow her to make any contributions!! So I guess best bet is to withdraw contribution......I know she wont have to pay penalty on the withdrawal, but she will have to treat any earnings on the amount as income, correct? Thanks Belle for the response and help. | |
| April 2, 2008 | |
| Duh, didn't really look at the ###'s. Could she do a non-deductible IRA. I know that's really the last option for most, just ahead of annuities, only for those with lots of excess cash.
She could then consider converting it to a Roth in 2010 when there aren't any AGI limits. I have one client who's planning on that - let's hope tax law 'simplification' doesn't change the rules. You're welcome! | |
Taxestaxes (talk|edits) said: | 2 April 2008 |
| According to my software, she cant even make nondeductible IRa contributions. thats why I am confused? Plus, she will be 65 this year, so converting to ROTH 2010 - not option for her......so back to my last post, wouldnt she just withdraw the contribution, and only be taxed on the earnings that it made; and then 10 percent penalty on that? Just looking for reassurance....thanks again!! | |
| April 2, 2008 | |
| Looks like withdrawal is the only option. If done by the 15th, only the earnings should be taxable with no penalties. | |
Taxestaxes (talk|edits) said: | 2 April 2008 |
| Thanks so much for your help. | |
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