Excess contributions to a Roth IRA

I made excess contributions to my Roth IRA in 2010 and 2011. I've already filed the 5329 and paid the penalty on the excess contribution for 2010. In 2011, I
filed my 1040 return timely before April 15th. I had my IRA custodian re characterize the 2011 monies as a non-deductible traditional contribution and I also withdrew the 2010 contribution out of the account. This was done in July of 2012. I believe I'm not required to pay a penalty on the 2010 contribution held over in 2011 or on the 2011 contribution but here's the rub; according to IRS Publication 590 (Individual Retirement Arrangement) for 2011: "If you timely filed your 2011 tax return without withdrawing a contribution that you made in 2011, you can still have the contribution returned to you within 6 months of the due date of your 2011 tax return, excluding extensions. If you do, file an amended return with “Filed pursuant to section 301.9100-2” written at the top. Report any related earnings on the amended return and include an explanation of the withdrawal. Make any other necessary changes on the amended return."
This sounds like I must amend my 2011 return before October 15th this year with the explanation listed above and include earnings. Which earnings though? 2011? 2010? or both? Does filing an amended return increase audit risk for me? And what explanation of the withdrawal must I include? I assume that the 2010 withdrawal is not taxable to me but I'd like someone to clarify that for me as well. Thanks for your help.
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wrote in message I made excess contributions to my Roth IRA in 2010 and 2011. I've already filed the 5329 and paid the penalty on the excess contribution for 2010. In 2011, I filed my 1040 return timely before April 15th. I had my IRA custodian re characterize the 2011 monies as a non-deductible traditional contribution and I also withdrew the 2010 contribution out of the account. This was done in July of 2012. I believe I'm not required to pay a penalty on the 2010 contribution held over in 2011 or on the 2011 contribution but here's the rub; according to IRS Publication 590 (Individual Retirement Arrangement) for 2011: "If you timely filed your 2011 tax return without withdrawing a contribution that you made in 2011, you can still have the contribution returned to you within 6 months of the due date of your 2011 tax return, excluding extensions. If you do, file an amended return with “Filed pursuant to section 301.9100-2” written at the top. Report any related earnings on the amended return and include an explanation of the withdrawal. Make any other necessary changes on the amended return."
This sounds like I must amend my 2011 return before October 15th this year with the explanation listed above and include earnings. Which earnings though? 2011? 2010? or both? Does filing an amended return increase audit risk for me? And what explanation of the withdrawal must I include? I assume that the 2010 withdrawal is not taxable to me but I'd like someone to clarify that for me as well. Thanks for your help. ============= What you have done is followed the IRS publication, not the law.
26 U.S.C. 4973 may define an "excess contribution" for a Roth IRA in subsection (f), but Congress never added the Roth IRA type of account to subsection (a). You have made a payment of an excise tax which is not authorized by Congress. You should file for a refund.
The Roth IRA is defined in section "408A" (actually, "408A(b)"), which is not the same as "408(a)" (traditional IRAs).
Section 4973 reads (at its beginning):
"(a) Tax imposed In the case of— (1)an individual retirement account (within the meaning of section 408(a)), (2)an Archer MSA (within the meaning of section 220(d)), (3)an individual retirement annuity (within the meaning of section 408(b)), a custodial account treated as an annuity contract under section 403(b)(7)(A) (relating to custodial accounts for regulated investment company stock), (4)a Coverdell education savings account (as defined in section 530), or (5)a health savings account (within the meaning of section 223(d)), there is imposed for each taxable year a tax in an amount equal to 6 percent of the amount of the excess contributions to such individual’s accounts ..."
Had Congress left out the parenthetical section citation for an IRA in "(1)" above, then I would agree that a Roth-IRA would be included. However, it did not. Congress' error when creating the Roth IRA by not adding it to the list in this section fails to establish statutory authority for the 6% excise tax over Roth-IRA excess contributions. There is no such tax to pay.
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On 8/27/12 9:41 AM, D. Stussy wrote:

Section 408A(a) says:
(a) General rule Except as provided in this section, a Roth IRA shall be treated for purposes of this title in the same manner as an individual retirement plan.
The rest of 408A provides the exceptions to treating a Roth the same as a traditional IRA. All the penalties (Subtitle D, Chapter 43) applicable to a traditional IRA are applicable to a Roth IRA unless there is an exception in Sec. 408A. There is no exception to the excess contribution penalty. Therefore, the ROTH IRA is treated the same as the traditional IRA when it comes to excess contributions.
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Alan
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"Alan" wrote in message

Section 408A(a) says:
(a) General rule Except as provided in this section, a Roth IRA shall be treated for purposes of this title in the same manner as an individual retirement plan.
The rest of 408A provides the exceptions to treating a Roth the same as a traditional IRA. All the penalties (Subtitle D, Chapter 43) applicable to a traditional IRA are applicable to a Roth IRA unless there is an exception in Sec. 408A. There is no exception to the excess contribution penalty. Therefore, the ROTH IRA is treated the same as the traditional IRA when it comes to excess contributions. ======================= ... And you didn't read down to 408A(f) where "individual retirement plan" is defined.
408(a) and (b) define "individual retirement account" and "individual retirement annuity" (respectively) but nowhere are they collectively called "individual retirement plans" in the IRC. There are exclusions in subsection(f) but nowhere does it include traditional IRAs either.
Regardless, the citation present in section 4973 of the section numbers defining the account types to which it applies override and SPECIFICALLY EXCLUDE Roth-IRAs by omission.
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On 8/28/12 6:02 PM, D. Stussy wrote:

1. You have misinterpreted 408A(f). That paragraph merely tells you that a SEP or SIMPLE plan can't be a Roth IRA. It is 408A(b) that tells you the definition of an individual retirement plan. It says:
(b) Roth IRA For purposes of this title, the term “Roth IRA” means an individual retirement plan (as defined in section 7701 (a)(37)) which is designated (in such manner as the Secretary may prescribe) at the time of establishment of the plan as a Roth IRA. Such designation shall be made in such manner as the Secretary may prescribe.
In other words, a Roth IRA is an individual retirement plan is defined in 7701(a)(37). That section tells you its an IRA.
(37) Individual retirement plan The term “individual retirement plan” means— (A) an individual retirement account described in section 408 (a), and (B) an individual retirement annuity described in section 408 (b).
Therefore, when 408A says that a Roth should be treated in the same manner as an IRA, it means all sections that pertain to an IRA pertain to a Roth, including the penalties.
Your interpretation effectively says that you can contribute as much as you want and have it grow tax free as there is no penalty for excess contributions.
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Alan
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"Alan" wrote in message

1. You have misinterpreted 408A(f). That paragraph merely tells you that a SEP or SIMPLE plan can't be a Roth IRA. It is 408A(b) that tells you the definition of an individual retirement plan. It says:
(b) Roth IRA For purposes of this title, the term “Roth IRA” means an individual retirement plan (as defined in section 7701 (a)(37)) which is designated (in such manner as the Secretary may prescribe) at the time of establishment of the plan as a Roth IRA. Such designation shall be made in such manner as the Secretary may prescribe.
In other words, a Roth IRA is an individual retirement plan is defined in 7701(a)(37). That section tells you its an IRA.
(37) Individual retirement plan The term “individual retirement plan” means— (A) an individual retirement account described in section 408 (a), and (B) an individual retirement annuity described in section 408 (b).
Therefore, when 408A says that a Roth should be treated in the same manner as an IRA, it means all sections that pertain to an IRA pertain to a Roth, including the penalties.
Your interpretation effectively says that you can contribute as much as you want and have it grow tax free as there is no penalty for excess contributions. ===================== Yes, but you still have the problem that section 4973 specifies the references to IRAs by section and subsection number, but does NOT include the section citation for Roth accounts. It is that specific omission which represents the failure by Congress to authorize the tax.
Had the references been WITHOUT section citations, I would agree that the excise tax applies. However, as Congress by citation directed this against traditional accounts ONLY, I cannot agree that such a tax against Roth accounts was ever authorized.
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On 8/29/12 5:27 PM, D. Stussy wrote:

Then we'll just have to disagree. Sec. 4973 did not require modification because 408A says that a Roth is an IRA and an individual retirement plan. That makes it subject to all the laws that affect IRAs unless there is something in the rest of 408A that is an exception.
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On 8/29/12 5:27 PM, D. Stussy wrote:
While not IRS guidance......
Ed Slott, noted IRA expert, Kaye Thomas, also a noted IRA expert and the folks at RothIRA.com... all say Roth IRA excess contributions are subject to the 6% penalty:
http://www.irahelp.com/forum/viewtopic.php?f=1&tv80 http://fairmark.com/rothira/excess.htm http://www.rothira.com/blog/change-your-investment-if-you-contribute-too-much-to-your-roth
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"Alan" wrote in message While not IRS guidance......
Ed Slott, noted IRA expert, Kaye Thomas, also a noted IRA expert and the folks at RothIRA.com... all say Roth IRA excess contributions are subject to the 6% penalty:
http://www.irahelp.com/forum/viewtopic.php?f=1&tv80 http://fairmark.com/rothira/excess.htm http://www.rothira.com/blog/change-your-investment-if-you-contribute-too-much-to-your-roth ================ Can you show that he actually read section 4973 as opposed to just taking the IRS' word for it?
It's the section citation that makes the difference. Roth IRAs are not defined in 408(a) or (b).
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On 9/1/12 8:19 AM, D. Stussy wrote:

http://www.rothira.com/blog/change-your-investment-if-you-contribute-too-much-to-your-roth
What you are missing is that 408A(a) states that that ALL of Title 26 including the penalties (unless there is an exception in 408A) applies to a Roth IRA because it is defined as an individual retirement plan. In fact every rule in every section that applies to a traditional IRA applies to a Roth unless there is an exception in 408A.
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Alan
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On Saturday, September 1, 2012 11:25:02 AM UTC-7, snipped-for-privacy@yahoo.com wrote:

Furthermore, Section 4973(f) defines how to calculate excess contributions to a Roth. If Roths weren't subject to penalties for excess contributions what would be the point? Its existence is fairly strong evidence that Congress intended the penalty to apply to Roths.
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" snipped-for-privacy@live.com" wrote in message wrote:

Furthermore, Section 4973(f) defines how to calculate excess contributions to a Roth. If Roths weren't subject to penalties for excess contributions what would be the point? Its existence is fairly strong evidence that Congress intended the penalty to apply to Roths.
===================You obviously didn't read the entire thread, else you would have seen that I already addressed that.
The specific section citation creates an exception to the 408A(a) statement.
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