Dang it / Excess ROTH Contribution

[RitaB]

Awesome. Client brings in a 2011 1099-R where Fred's Top Security Bank & Trust returned $1600 in excess ROTH contribution for 2010. Code "PJ" and I assume the "P" means "Prior" and IRS will look for an amended 2010? Even though bank returned the dough on 1/25/11? Is there a way to "splain" on 2011 return? I am looking at 5329 and 8606 and not finding anything that makes me happy. AAUGH.

People really should avoid investments they don't understand. And vendors should not sell things they don't understand. This had nothing to do with his earnings. He simply contributed $7600 to his ROTH. Awesome.

Oh, yeah, I know they missed returning the earnings. Awesome.

[RitaB]

Sorry bout that

Maybe I found what I need on Form 8606, Part III. Pardon my panic up there.

[Peachie]

Rita,

We are still in tax season 2011. The money has been withdrawn and your remedy will come from forms 8606 and 5329 or either. I have an excess for 2011 and 2012. I don't have to do anything until 2012. The money has been withdrawn now.

[RitaB]

Yeah

We are still in tax season 2011. The money has been withdrawn and your remedy will come from forms 8606 and 5329 or either. I have an excess for 2011 and 2012. I don't have to do anything until 2012. The money has been withdrawn now.

I finally found what I needed. I had done a search (not here) where someone answered "you have to amend the prior year".

Thought for the day: I don't need anger management. I need people to stop #$^^@#$ me off. LOL.

[FEDUKE404]

Not to rain on your parade

I've endured several Roth "PJ" events.

Read the fine print - if they recently figured out they put too much into the pot during 2011, and "fix things" in 2012 (before 04/17), they could easily have taxable income for calendar year 2011. The trick is when will YOU have that number? Wait....wait....wait....or (even worse) [i]amend[/i/].

This seems to be a recurring problem - it would be nice if people were a bit more careful if they are anywhere near the Roth dollar limits. It's far better to WAIT than to have to fix the problem afterward.

FWIW: I think the two worst (~common) things I hate to encounter are Form 1098-T and someone with an "Oops!" on their Roth IRA. Very time consuming, and a lot of the clients think I'm just being a PITA for trying to do things the correct way.

Perhaps just call it a day and treat yourself to a nice glass of vino??

FE

[RitaB]

Read the fine print - if they recently figured out they put too much into the pot during 2011, and "fix things" in 2012 (before 04/17), they could easily have taxable income for calendar year 2011. The trick is when will YOU have that number? Wait....wait....wait....or (even worse) [i]amend[/i/].

FE

As I indicated in the OP, the excess contribution was $1600 for year 2010, and $1600 was returned to client on 1/25/11. The guy contributed $7600, and the bank let him.

The trick is to hunt down the guy at the bank and /or the client and put the smackdown on them.

[FEDUKE404]

2010 still in jeopardy

As I indicated in the OP, the excess contribution was $1600 for year 2010, and $1600 was returned to client on 1/25/11. The guy contributed $7600, and the bank let him.

The trick is to hunt down the guy at the bank and /or the client and put the smackdown on them.

I still think it is quite likely that you will have some "new" 2010 income to deal with. About the only thing that would make it go away (for 2010) is if the "new" money for 2010 was not put into the account until after 12/31/2010 (unlikely!) or the "bad" funds lost value from time in to time out (possible with stock market at the time).

Quoting from memory (it's been a long day...) IIRC the IRS will deem the extra income from the erroneous contribution (with $1600, this means the guy was old enough to put not $5k but $6k into the account?) to be from 2010. The fact that he took the funds out in January of 2011 does not change that fact.

Of course, if the client knows people at the bank who can "fix" things....that is a different topic altogether!

FINAL: At the risk of asking a dumb question: Is there any possibility some of the 2010 money was perhaps "late" funds for 2009, i.e. placed into the account between 01/01/2010 and 04/15/2010? You do have to tell the firm which year if not the current one.

FE