Excess Roth IRA Contributions
I just completed my 2007 federal tax return and my MAGI in the phase out range for a Roth IRA. Earlier this year I contributed $4,000 to my Roth IRA account. Based upon my calculations, I am only allowed to contribute $680. Thus, I must ask the custodian to withdraw the excess $3,320 and move it into my traditional IRA account. Do I also have the custodian calculate how much of the Roth IRA dividend for the year must be moved based on the above percentage? Do I need to file any IRA forms concerning the above? Please advise.
Permalink Submitted by Denise Appleby on Mon, 2008-02-18 22:20
Be sure to let the custodian know that you want a [url=http://www.retirementdictionary.com/Recharacterization.htm%5Drecharacteriz….
You will need to move any [url=http://www.retirementdictionary.com/nia.htm%5DNIA%5B/url%5Dalong with the excess amount. Some custodians will calculate the NIA . If your custodian will not, you may refer to the instructions in [url=http://www.retirementdictionary.com/nia.htm%5DTD 9056[/url].
The NIA can be earnings or losses. If it is a loss, the amount recharacterized will be less than the excess contribution amount…but will be treated as the entire amount for IRA purposes. The idea is that the amount moved must represent what it would have been, had it been in the traditional IRA from the time the amount was contributed .
Since you are doing a partial recharacterization, you will need to file IRS [url=http://www.retirementdictionary.com/8606-form.htm%5DForm 8606[/url]. You should also attach a statement to your tax return, explaining the recharacterization.