IRA-EXCESS CONTRIBUTION
Contribution amount exceed ROTH-IRA limit by $250.00. Money was removed from 2007 ROTH-IRA early in 2008 and applied as first contribution to ROTH IRA for 2008. Money never touched human hands. Any penalties? Any form to be filed?
Permalink Submitted by Alan Spross on Mon, 2008-03-10 20:50
Was the custodian asked to process a return of contribution or excess contribution? If so, the earnings on the contribution also had to be distributed before contributing for 2008. How much was the earnings?
Only the earnings would be taxed and subject to penalty, not the actual amount of the excess contribution. The earnings amount would be shown on line 15b and the 10% penalty on the earnings just added to line 60. While no form is required, the IRS suggests that a narrative explanatory statement be included explaining the corrective distribution. The 1099 R for this will not be issued until next January.
Permalink Submitted by AL LINDQUIST on Mon, 2008-03-10 21:11
Thanks so much for the reply. I think Prescott is a neat place to live. There were no earnings on the excess contribution. They actually returned less money, by about $10.00, then the excess contribution. If there was a “loss” then I assume no reporting for 2007 taxes due this year, and the 1099R will be sent in January 2009 and there is no penalty or concern for the excess contribution as what was returned was less.
I assume the return of the excess for 2007 counts as a 2008 contribution.
Thanks gain!
Permalink Submitted by Alan Spross on Mon, 2008-03-10 22:22
Your assumptions are correct.
Of course, the return of the excess only accounts toward your 2008 contribution because you had them apply the $250. You should get a statement from the IRA custodian showing this amount as applied to 2008.