IRA Excess Contribution
If someone deducts an IRA on their 2009 return but they were in an employer plan and over the income limit, can they just amend the return and make the IRA non deductible without taking the money back out? If so, are there penalties associated with this?
Thank you!
Permalink Submitted by Alan Spross on Mon, 2010-12-20 19:05
Yes, they can add an 8606 with a 1040X to report the change to a non deductible contribution. That is the best solution now. This will generate a tax bill and a small underpayment penalty for the time between 4/15/2010 and the date paid.
They also might have recharacterized the contribution to a Roth if they were income eligible, but the deadline for that was 10/15/2010. That was also the deadline to remove the contribution without a 6% excise tax for 2009.