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Originally Posted by shaja For the year 2013, we made a excess contribution of 4992 in the ROTH IRA but realized late march of 2014 that we were not eligible to ROTH IRA because of our AGI. We removed the money from the the ROTH IRA before April 15th but need help to figure out how to report taxes. Based on the IRS document, the taxes for any income earned from the ROTH IRA would need to be reported in 2013 tax returns. We filed an extension in April so we could figure out how to report this. Also, I don't have any paperwork and wont be receiving it until early 2014. How do I report this so I can pay the taxes on the income earned which was 881.46. Also, would there be a penalty in addition to the taxes that I will pay. Appreciate everyone's help. |
For the year 2013, we made a excess contribution of 4992 in the ROTH IRA but realized late march of 2014 that we were not eligible to ROTH IRA because of our AGI. We removed the money from the the ROTH IRA before April 15th but need help to figure out how to report taxes.==========>>>> To correct your excess contribution, you must remove the excess amount and ANY APPLICAPABLE INCOME from the IRA by your tax-filing deadline, which is generally April 15. 2015.But if you miss the April 15 deadline, you may still be able to make the correction, as individuals who file tax returns by April 15 receive an automatic six-month extension on the deadline for removing the excess amount.
Based on the IRS document, the taxes for any income earned from the ROTH IRA would need to be reported in 2013 tax returns. We filed an extension in April so we could figure out how to report this. Also, I don't have any paperwork and wont be receiving it until early 2014. How do I report this so I can pay the taxes on the income earned which was 881.46. =======>> If you are not able to identify the earning to the 2 years than you may want to calculate it based on a reasonable allocation method or even request your brokerage/financial institution holding the account to allocate it for you. As you corrected the excess contribution before your tax-filing deadline, the IRS requires a calculation to determine the earnings or loss on the excess IRA contribution, the net amount you report as a contribution made for the 2013 year. The earnings or loss amount is factored into the amount of your return of excess distribution. This calculation is done based on IRS Notice 2000-39 and IRS Final Regulation 1.408-11.
Also, would there be a penalty in addition to the taxes that I will pay. =====>>>>>>>>yes; as failure to pay tax by apr 15 2014. When you make an excess contribution, you have until your tax return is due, including extensions, to remove the extra money and avoid the penalty tax. If you discover the error after you file, you can take the excess contribution out and file an amended return, again by your filing deadline including extensions. You must take out any earnings attributable to the excess money. These earnings are taxable and must be reported on your income tax return.