I just learned that my 2004 and 2005 Roth IRA contributions are not allowed because my income exceeds the limits. Can I just withdraw the contributions plus earnings without penalty?

By Denise Appleby AAA
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. What is the difference between a Traditional and a Roth IRA?

    The main difference between a Traditional and a Roth IRA is the way contributions are deducted for tax breaks. Whereas contributions ...
  2. I am in my mid thirties and have nothing invested for retirement. Is it too late ...

    It is never too late to start saving for retirement. Even starting at age 35 means you will have more than 30 years to save.The ...
  3. Should I collect early Social Security?

    The earliest age that you can start receiving social security benefits is age 62. Full retirement was age 65 for many years; ...
  4. I work for two companies. How much can I contribute to each company's SIMPLE IRA?

    It depends.If you work for two companies that are unrelated and unaffiliated, you can make salary deferral contributions ...
RELATED TERMS
  1. Gold IRA

    Definition of Gold IRA
  2. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  3. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...
  4. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...
  5. Peri-Retirement

    A term for the period of time leading up to actual retirement. ...
  6. MyRA

    A new tax-advantaged retirement account that President Barack ...
comments powered by Disqus
Related Articles
  1. An Overview Of The Pension Benefit Guaranty ...
    Retirement

    An Overview Of The Pension Benefit Guaranty ...

  2. Business Owners: Rules For Qualified ...
    Entrepreneurship

    Business Owners: Rules For Qualified ...

  3. Keeping Track Of Retirement Plan Assets
    Retirement

    Keeping Track Of Retirement Plan Assets

  4. Tips On How To Use IRAs To Boost Retirement ...
    Retirement

    Tips On How To Use IRAs To Boost Retirement ...

  5. Tax-Saving Advice For IRA Holders
    Taxes

    Tax-Saving Advice For IRA Holders

Trading Center