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.
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
Click to see the full signature.