ROE earnings seem incorrect
We have a client who had 2018 and 2019 excess contributions. They calculated earnings on the 2018 contributions, removed it then did the 2019 calculation the next day. The interesting thing is that the 2019 calculation produced earnings but the value of the account doesn’t match up. In fact, based on that number it looks like there should have been a loss. We’ve double checked their numbers and everything seems to be accurate. How should they proceed in this instance? Should they report earnings or losses? Thank you!
Permalink Submitted by Alan - IRA critic on Thu, 2019-04-11 23:23
If client thinks that the IRA custodian miscalculated the net income attributed to these contributions, they need to call them and explain why. First, the client should review the NIA formula because there are often adjustments to be made to the opening or closing balances. The more adjustments that have to be made, the more chance for error. The 1099R forms issued next January will report the amounts returned. Any gains are taxable in the year in which the contributions were made, so if the 2018 contribution was made in 2018 any gains returned on that contribution will be taxable on the 2018 return.