Roth IRA contribution withdrawal?
My wife and I put money into our Roth IRA last year. It was only in reading your book that we saw the income cap of $156,000. Our earned income was less than that amount, but we sold some land that we had for more than 20 years, and that put us over $156,000. Do we have to withdraw the amount? And if so how do you do that?
Permalink Submitted by Alan Spross on Fri, 2008-06-27 22:05
You would contact the IRA custodian prior to 10/15/08 and tell them you wish to correct an excess contribution to your Roth for 2007 (both of you or just one?) The custodian will calculate the amount of earnings or loss on the contribution and return it to you. You will then get a 1099R reporting the correction next January. The earnings are taxable and subject to penalty unless you are 59.5, and that means you would need to amend your 2007 return to report them.
Note the the contribution is not fully phased out until your modified AGI is 166,000. If you are between 156 and 166 you can make a partial contribution.
You could also choose to recharacterize the contribution to a non deductible TIRA or leave the contribution in and pay a 6% excise tax for 2007. You could then apply that contribution to 2008. This works good if you have real good earnings and/or do not want to file a full amended return. So you have a couple choices, and the amount of earnings made on your contribution may influence that choice.