A:

The 2004 excess amount to your Roth IRA would have to be removed by October 15, 2005, to avoid the 6% penalty (assuming that you filed your tax return or filed for an extension on April 15, you receive an automatic extension to October 15, 2005 to remove excess amounts).



You have until October 15, 2006, to remove the 2005 contribution.



If you remove the excess amount plus any earnings or minus any losses by the deadline, your tax preparer will need to amend your return to remove the 6% penalty.



<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?>



For more on this, read Correcting Ineligible (Excess) IRA Contributions - Part 1, Part 2 and Part 3.



This question was answered by Denise Appleby
(Contact Denise)



RELATED FAQS
  1. I overcontributed to my Roth, then lost half of this money to the market. Does the ...

    It depends. If the excess contribution is removed from your Roth IRA by your tax-filing deadline plus any extensions, along ... Read Answer >>
  2. What procedure applies to a taxpayer who made excess contributions for 2001, 2002, ...

    If the IRA owner filed his/her 2004 tax return by the due date, including any extensions, he/she receives an automatic six-month ... Read Answer >>
Related Articles
  1. Retirement

    How To Correct Ineligible (Excess) IRA Contributions

    Eager to save for retirement? Learn how to avoid overpayment penalties.
  2. Retirement

    Tax Treatment Of Ineligible IRA Rollovers

    Eager to save for retirement? Learn how to avoid overpayment penalties.
  3. Retirement

    Avoiding IRS Penalties On Your IRA Assets

    The best way to avoid additional charges and taxes is to know which transactions have expensive consequences.
  4. Retirement

    Retirement Plan Tax Prep Checklist

    Here's a list of items you need to have in order by tax time, including paying attention to those pesky required minimum distributions.
  5. Retirement

    Don't Make These Top 10 Mistakes On Your Roth IRA

    Don't lose out on the benefits of a Roth by contributing too much, breaking rollover rules or making other avoidable errors.
  6. Retirement

    How to Use Your Roth IRA as an Emergency Fund

    Do you feel like you don’t have enough money to save for emergencies and also save for retirement? An often-overlooked feature of the Roth IRA could solve your problem.
  7. Taxes

    Get a 6-Month Tax Extension

    Discover how to get some extra time from the IRS, without paying a hefty penalty for the privilege.
  8. Financial Advisor

    Why You Should Have a Roth IRA

    The world of retirement savings plans is filled with options. Here are the reasons why you should consider a Roth IRA when saving for retirement.
  9. Retirement

    IRA Contributions: Eligibility And Deadlines

    Use this checklist for contribution requirements to make your payments on time.
  10. Retirement

    Roth vs. Traditional IRA: Which Is Right For You?

    To answer this question, you need to consider several of the factors we outline here.
RELATED TERMS
  1. Roth IRA

    A Roth IRA is an individual retirement plan that bears many similarities ...
  2. IRS Publication 590: Individual Retirement Arrangements (IRAs)

    A document published by the Internal Revenue Service (IRS) that ...
  3. Qualified Distribution

    Distributions made from a Roth IRA that are tax and penalty free. ...
  4. IRA Plan

    A plan that individuals may establish to arrange and plan for ...
  5. Excess Profits Tax

    A special tax that is assessed upon income beyond a specified ...
  6. Excess Accumulation Penalty

    The penalty a retirement account owner or the beneficiary of ...
Hot Definitions
  1. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  2. Derivative

    A security with a price that is dependent upon or derived from one or more underlying assets.
  3. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  4. Sharpe Ratio

    The Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such ...
  5. Death Taxes

    Taxes imposed by the federal and/or state government on someone's estate upon their death. These taxes are levied on the ...
  6. Retained Earnings

    Retained earnings is the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested ...
Trading Center