I just found out that my clients, who have been fully retired since the end of 2008 and well over 59 ½, have been contributing to ROTH IRAs through monthly deductions from their bank account in 2009, 2010, and early 2011. So now they have “excess contributions.”
I have read TTB 13-1 & 13-11, and Pub 590, and understand there will be a 6% penalty on the excess contributions each year, except for the 2011 contribution, which will be withdrawn before April 17. I also understand that the earnings on these contributions must also be withdrawn. Here’s where I lose it:
Will the investment company issue 1099s for each year for each withdrawal of the excess contributions, or one 1099 for the total withdrawal? Will it be a 2012 1099? If it is a 2012 1099, but I have to show it on the 2011 return, how do I deal with the 1099 next year?
The way I read TTB and Pub 590, the earnings are considered “earned and received” in the year of the excess contribution. I guess this means that 2009 and 2010 need to be amended to include the earnings. I have the same questions about 1099s for the earnings as for the withdrawal of the excess contributions.
Don’t ask me why people who are in the 0% tax bracket want a ROTH IRA, or why their investment person, who is also an EA, let them do it. (Okay, I suppose it would allow them to withdraw a large sum in one year from the ROTH without making their SS taxable.)
I appreciate any help.
I have read TTB 13-1 & 13-11, and Pub 590, and understand there will be a 6% penalty on the excess contributions each year, except for the 2011 contribution, which will be withdrawn before April 17. I also understand that the earnings on these contributions must also be withdrawn. Here’s where I lose it:
Will the investment company issue 1099s for each year for each withdrawal of the excess contributions, or one 1099 for the total withdrawal? Will it be a 2012 1099? If it is a 2012 1099, but I have to show it on the 2011 return, how do I deal with the 1099 next year?
The way I read TTB and Pub 590, the earnings are considered “earned and received” in the year of the excess contribution. I guess this means that 2009 and 2010 need to be amended to include the earnings. I have the same questions about 1099s for the earnings as for the withdrawal of the excess contributions.
Don’t ask me why people who are in the 0% tax bracket want a ROTH IRA, or why their investment person, who is also an EA, let them do it. (Okay, I suppose it would allow them to withdraw a large sum in one year from the ROTH without making their SS taxable.)
I appreciate any help.
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