FIX: Rolling Over the Tax Withheld on a Distribution. Was the mandatory tax of 20% withheld on your work plan withdrawal even though you intended to roll over the entire account? Did you change your mind on an IRA withdrawal and now want to roll it back, but you elected to have taxes withheld on the initial distribution? If money was withheld for taxes on a distribution from a work plan or an IRA and you want to roll over the distribution plus taxes withheld, you can make up the difference “out-of-pocket.” The money withheld and sent to the IRS is gone, but you can replace that withholding with other dollars, roll over the full amount, and have a credit waiting for you for the amount withheld when you do your taxes next year.
You can have too much of a good thing. A contribution to your IRA is a great way to save for retirement, but there are limits. If you exceed those limits you will end up with an excess IRA contribution and a tax mess. This was the fate of two taxpayers in a recent court case, where mega IRA contributions resulted in excess contributions and penalties.
In order to make an IRA or Roth IRA contribution, you must have “compensation.” What exactly is the definition of compensation for IRA purposes? This article explains the various forms.
You took a distribution from your employer plan or another IRA and the receiving company put it in the wrong account. Your IRA company did not process your 72(t) distribution in the correct amount. An advisor/salesman told you that the company offering a “great” investment could hold it as an IRA. Someone at the bank told you that you could do a rollover in 90 days, or that you could roll over more than one IRA distribution in a year. You get the idea. So who is at fault for these issues?
When it comes to investing your IRAs, you are in the driver’s seat. If an investment is no longer working for you and another opportunity better fits your retirement savings strategy, you may want to move your IRA funds. You are probably aware that some investments may limit your ability to do this or impose penalties, but often overlooked are the serious consequences that will occur if you run afoul of the IRA rules when trying to make your move. Before you decide to take a distribution from your IRA, you will want to understand three very important rules that apply to rollovers.
Can you contribute to both an IRA and a Roth IRA in the same year? Yes, if you follow the rules. This Monday afternoon blog post discusses those rules and the complications that occur if you don't follow them.
This week's Slott Report Mailbag looks at possible miscues and how to handle them. What constitutes an excess Roth IRA contribution? One individual below has to deal with the 6% penalty while another doesn't. We explain why.
A new report from the Treasury Inspector General for Tax Administration (TIGTA) found that IRS hasn't done enough to address the problem of excess IRA contributions. What is an excess IRA contribution and how do you fix it?
This week's Slott Report Mailbag inquires about Roth IRA contribution eligibility, what to do when excess contribution penalties are delivered due to administrative error and the always-confusing 5-year rules for Roth IRAs.
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