Excess Roth Contribution

[KBTS]

I have searched the board and could not find a thread with this same situation...

Client made a $4,000 contribution for 2007 to their Roth IRA in January of this year. Now it turns out that their contribution is limited to $2,400. Can they instruct the broker to change $1,600 of the amount to 2008 and avoid withdrawing the excess and all the hassle that goes with reporting the earnings and paying the 10% penalty?

If this is not possible, what if the excess has lost money due to the current market conditions - I would guess I would just attach a statement describing the withdrawal and there would not be anything else to report since the loss is not deductible.

[LawrenceGR]

I would

have the client call their Roth person to have the excess removed or assigned to 2008.

[KBTS]

Just moving back to the top.

Client was to call broker yesterday.

Any more ideas?

[Burke]

Have the broker reassign contribution to 2008. It's a better option than withdrawing, although if it is done prior to the due date of the 2007 return (4/15/08) there is no penalty. The problem is in the reporting. He will surely get a 1099R showing early distribution if he takes it out and you will have to deal with it next year. See form 5329.