Over contributing to Simple IRA
We have a client who over contributed to his Simple Plan. When calculating how much he has to take out of the plan – Is it contributions + earnings (ie, dividends, capital gain distributions) or do you have to also include any appreciation associated with that contribution?
Thanks
Permalink Submitted by Alan Spross on Mon, 2010-04-12 19:26
If this was for 2009, the corrective distribution must be taken by 10/15/2010, his extended due date. But to use that extended due date he must either file his return on time or an extension by 4/15 (3 days). When the corrective distribution is ordered, the custodian should complete a net allocated earnings calculation to determine the exact amount to be distributed. That depends on the investment results for the entire account during the period the excess was invested. That includes dividends and investment gains or losses for the entire account.
If the 2009 return is filed taking a deduction for the excess contribution, it will have to be amended to eliminate that deduction, ie the amount is added to income. Any earnings would also be taxable in the year the excess was contributed (could be either 09 or 10), and the earnings will be subject to the 10% penalty unless he is over 59.5.