My daughter was doing her income taxes using TT. When she put in her ROTH IRA information, her taxes suddenly went up by $30.
Further investigation showed she contributed about $450 too much based on her earned income. What to do:
1) Will paying the extra $30. take care of the problem or2) Can she just quickly take out the extra $450? If so, will this result in more complicated paperwork or can she just indicate on TT her net Roth IRA contribution?
Mel
Option 1: Assuming she will have earned income of at least $450 in 2013, report the excess contribution on her 2012 return using Form 5329, Part IV. She then reduces her maximum 2013 by the 2012 excess and clears everything on her 2013 Form 5329.
Option 2: She tells the custodian that she wants to withdraw the excess contribution and the earnings on it. She tells TT that she made only the allowable contribution. If the earnings are negative she's done. If the earnings are positive she includes them in 2012 income and the earnings are subject to the 10% premature distribution penalty, which she reports on her 2012 Form 5329, Part I.
See Publication 590.
Phil Marti VITA/TCE Volunteer Clarksburg, MD
report the excess contribution on her 2012 return using Form 5329, Part IV. She then reduces her maximum 2013 by the 2012 excess and clears everything on her
2013 Form 5329.Does this option still incur the 6% penalty? That's how I'm reading
5329. Only $27, but it seems the 6% penalty still takes place.
report the excess contribution on her 2012 return using Form 5329, Part IV. She then reduces her maximum 2013 by the 2012 excess and clears everything on her
2013 Form 5329.contribution and the earnings on it. She tells TT that she made only the allowable contribution. If the earnings are negative she's done. If the earnings are positive she includes them in 2012 income and the earnings are subject to the 10% premature distribution penalty, which she reports on her 2012 Form 5329, Part I.
Would the custodian be able to tell her what her earnings are? I think she made regular deposits. My guess is that her earnings would not be much. Her last $450 might have been in Janus for an average of maybe 3 months. So let's say it was $40 in earnings (probably less). So she has to pay $4. extra?
Mel
report the excess contribution on her 2012 return using Form 5329, Part IV. She then reduces her maximum 2013 by the 2012 excess and clears everything on her
2013 Form 5329.Yes.
Phil Marti VITA/TCE Volunteer Clarksburg, MD
contribution and the earnings on it. She tells TT that she made only the allowable contribution. If the earnings are negative she's done. If the earnings are positive she includes them in 2012 income and the earnings are subject to the 10% premature distribution penalty, which she reports on her 2012 Form 5329, Part I.
Yes.
Yes.
Phil Marti VITA/TCE Volunteer Clarksburg, MD
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