I have a taxpayer that made contributions to his 2 minor children’s Education IRAs for tax years 2007, 2009, and 2010. He realized in 2011 that his income was over the contribution limit in each of those years. He plans to withdraw the contributions in 2011.
I’m not sure if I understand the IRS Pub 970 correctly.
1. Do I fill out a Form 5329 for each year and pay the excise tax of 6% all ot once?
2. Since the money won’t be withdrawn until 2011, do I prepare a tax return for 2007, 2009, and 2010 to report the excess contribution and attach the 5329 for each child? There were no retuns filed previously since there were no income to these children.
3. Do I wait to file the returns after I receive a 1099 form from the financial institution?
4. Must the interest be withdrawn too, and taxable based on value at end of each of those years?

Geralyn S., Louisiana