Excess Contributions to an IRA from Keough rollover
I have a client who rolled his Keough into an IRA early in ’08. In speaking with one of our Advanced Planning Attorney’s; I’ve been told that since he was a part-year participant in a Keough, (Jan & Feb), the portion that represents his Keough RMD for tax-year ’08 was ineligible for rollover to his IRA. He has since taken his IRA RMD for ’08, and he now needs to back-out the additional Keough requirement. I’m looking for some help in running this calculation – I know that gains must be calculated, however can losses be included as well. How do I run this calculation? Thanks so much!
Permalink Submitted by Al Fry on Sat, 2008-12-20 14:52
I believe he was a Doctor and sole owner, age 73.
Permalink Submitted by F. Anthony Brown on Sat, 2008-12-20 15:10
That is correct! currently 74 years old.
Permalink Submitted by Alan Spross on Sat, 2008-12-20 18:54
How did Al know that?
Yes, the amount of the RMD that was rolled into the IRA must be removed as an excess contribution to the IRA. Usually the IRA custodian will do the calculation, but they do not have to. The worksheet on p 31 of Pub 590 includes the formula. If the earnings were positive, they are added to the amount of the contribution and the earnings are taxable when distributed. If negative, the corrective distribution will be less than the RMD contributed.
The RMD amount is also taxable.
Permalink Submitted by Al Fry on Sat, 2008-12-20 19:54
TKU Alan. Thats what I told Tony, except I did not know what to do about the losses. I told him you would have a more authoritive answer.
Permalink Submitted by F. Anthony Brown on Sat, 2008-12-20 21:13
Didn’t you know Al is Clairvoyant??? Thanks very much. Happy Holidays.