My wife was the sole person in her business. Her work ended in March. Not realizing that her final payment was substantially less than usual, I, as her SIMPLE IRA administrator, mistakenly deposited the "normal" amount for her March SIMPLE deposit. Therefore, the 2006 deposits in the SIMPLE exceeded her total income from the work for the year. (She essentially was socking away close to 100% of her income). I only discovered this recently. I understand that I have made excess contributions. Fidelity told us to send them a letter and they will back-out the excess contributions and associated earnings. My questions:
1) I understand that there are no tax consequences on the amount of the excess itself, correct?
2) Is it correct that we owe ordinary income tax plus the
10% penalty on the earnings related to the excess?
3) What IRS statement should I expect from Fidelity that describe all of these transactions? Thanks.
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