IRA excess contributions

[Bird Legs]

Client made excess contributions to the 2005 IRA account. What is the latest date
to transfer the excess amount to year 2006?
Thanks

[Roland Slugg]

Due date for filing

It's the due date for filing his 2005 return ... October 16, 2006 if he filed an extension, otherwise it was last April 17th.

However, if the contribution was actually made in 2005, the income earned in 2005 on that excess must be withdrawn and is taxable on the taxpayer's 2005 return. If the excess contribution was made in 2006, it can simply be redesignated as a 2006 contribution by notifying the IRA custodian/trustee.

The 6% excise tax will apply if the withdrawal or redesignation is made after the due date of the T/P's 2005 return.

[Bird Legs]

Roland

Thank you very much for your response.