Excess contribution removal
Hi there,
I have $1,000 contributed to my Traditional IRA for 2017, but I now want to remove those contributions because I realized that those contributions will be non-deductible. Can I remove those contributions as a “Removal of excess 2017 contributions” distribution type, even though those contributions have not been made in excess of the $5,500 limit? If I do this type of a distribution without breaking the limit, will I be subject to some sort of penalty or trouble along the line?
Thanks
Permalink Submitted by Alan - IRA critic on Wed, 2017-02-22 16:45
You can request a return of your 2017 contribution with allocated earnings. It is handled the same way as an excess contribution even though it is not an excess contribution. Any earnings you receive will be taxable on your 2017 return and also subject to 10% penalty, but I doubt that you would have more than a few dollars of earnings. Another alternative is recharacterizing the contribution as a Roth IRA contribution as long as your income is not too high for a Roth contribution. That would make any earnings Roth earnings and they would not be withdrawn or taxed. You would probably only do this if you already have a Roth account.