Client had previously placed $5k into Roth IRA account for tax year 2008. Due to income issues all of the 2008 funds had to be withdrawn to avoid excess contributions penalties. Client made request to stockbroker to remove the 2008 funds (and earnings).
Is it just me, or does NO ONE understand the tax rules as to how to handle this? Stockbrokers at two different (full-service) firms just "let the IRA people handle it" and were essentially clueless.
I thought, in simple terms, the removal of the funds prior to April 15th is not technically a "withdrawal" (compare same actions on, let's say, May 1st) and that the only tax liability would be from the income (pro-rated by account assets while the funds were present) earned. In the recent stock market, that number could easily be zero (loss).
The other issue was whether any "earnings" would be 2009 taxable income, or perhaps 2008 taxable income. With sufficient time to wait, I preferred not to be in a position to have to file an amended 2008 return.
We never got anything resembling an answer, so will just wait for the Form 1099-R to appear.
Does anyone care to guess what will be on said 2009 Form 1099-R? Let's say a $5k withdrawal and $400 of allocated "income." Will there be a $5,400 withdrawal or a $400 withdrawal or maybe even a $5,000 withdrawal? Will there be a "taxable amount" or just "undetermined"? Will the $400 be taxable income for calendar year 2008 or for calendar year 2009?
FE
Is it just me, or does NO ONE understand the tax rules as to how to handle this? Stockbrokers at two different (full-service) firms just "let the IRA people handle it" and were essentially clueless.
I thought, in simple terms, the removal of the funds prior to April 15th is not technically a "withdrawal" (compare same actions on, let's say, May 1st) and that the only tax liability would be from the income (pro-rated by account assets while the funds were present) earned. In the recent stock market, that number could easily be zero (loss).
The other issue was whether any "earnings" would be 2009 taxable income, or perhaps 2008 taxable income. With sufficient time to wait, I preferred not to be in a position to have to file an amended 2008 return.
We never got anything resembling an answer, so will just wait for the Form 1099-R to appear.
Does anyone care to guess what will be on said 2009 Form 1099-R? Let's say a $5k withdrawal and $400 of allocated "income." Will there be a $5,400 withdrawal or a $400 withdrawal or maybe even a $5,000 withdrawal? Will there be a "taxable amount" or just "undetermined"? Will the $400 be taxable income for calendar year 2008 or for calendar year 2009?
FE