Rollover of nonqualified funds into traditional IRA
Financial advisor deposited monies from an individual client account (non IRA) into a traditional IRA. How can those funds be taken out without a tax consequence or is one not available?
Financial advisor deposited monies from an individual client account (non IRA) into a traditional IRA. How can those funds be taken out without a tax consequence or is one not available?
Permalink Submitted by Alan - IRA critic on Wed, 2016-03-02 17:59
This is an excess IRA contribution to the extent that the client cannot apply some of it as a regular contribution. If no deduction is claimed, the corrective distribution is not taxable except for any earnings generated on the deposit. The situation will have to be explained to the IRA custodian in order to get them to code the distribution as an excess contribution correction. If not coded right, the distribution will not correct the excess with respect to avoiding a 6% excise tax for at least one year.