excess roth ira contribution
question:
If an excess Roth contribution was made at 50, but the excess was removed at 60 does the 10% early distribution rule apply since the excess was contributed at 50.
How would this work?
I know the 6% tax per year applies.
Permalink Submitted by Alan - IRA critic on Tue, 2022-02-01 02:07
The distribution is reported as a normal distribution on the 1099R. There is no 10% penalty since the distribution occurred after 59.5, and there probably would not have been a penalty even if the distribution occurred prior to 59.5 since the penalty only applies to the taxable portion of a distribution. Unless the person had already withdrawn their balance in regular Roth contributions, the return of the excess amount would have come from the balance in regular Roth contributions which come out tax and penalty free.
If the Roth excess at 50 was the first regular Roth contribution, the 5 year holding period cannot start with an excess contribution. It starts with the first allowed contribution.