Overfunded Roth – not filed return

Submitted by Maggie Benton on Fri, 2014-06-20 23:43

Just inherited this client via life insurance and he is asking this question

Am I correct that if the tax return for 2013 has not yet been filed (on extension) then the depositor can simply have administrator distribute the amount overfunded?
Example: Married filing jointly MAGI is 186,890 … new client decided to put $5000 each into Roth Ira (total $10,000) last April 2013.

I show their correct amount should be $2200 total or $1100 each

Right? Wrong?



Submitted by Alan - IRA critic on Sat, 2014-06-21 01:22

  • Client has several options, return of excess contribution with allocated earnings, recharacterization as a non deductible TIRA contribution or even paying the 6% excise tax to avoid having to withdraw earnings if the earnings were very substantial. Since the extension for 2013 was filed on time, the deadline for a return of excess contribution or recharacterization is 10/15/2014 for the 2013 contribution. If the excess is returned, the earnings will be subject to tax and penalty on the 2013 return.
  • Your allowed contribution does not look right based on the numbers posted. I roughly get 610 as the allowed amount.


Submitted by Maggie Benton on Sat, 2014-06-21 14:18

Thank you… I see the error on my calculation…   husband and wife can each contribute the $610 or do we have to divide that up?



Submitted by Alan - IRA critic on Sat, 2014-06-21 18:16

They can each contribute $610, which means the excess contribution for each was $4390.



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