Charlie K wrote:
- quote -

If the sum of all distributions taken, including the distribution to
correct excess contributions, is less than the total amount of all
contributions made to the Roth IRA, the distribution is not subject to
the 10% tax. See pg. 60 of the 2004 IRS publication 590. As I said, it
sounds like the OP has made previous contributions, and thus may not owe
the 10% penalty. Basically, the distribution is treated as coming from
your contributions.

Glancing through p590, it also appears that the OP may be able to apply
the excess contribution to a later year (with no penalty). As always,
consulting a tax professional is advised...

-Will

Whether you believe the penalty or not applies doesn't change the tax
law, it applies. See this article for the way to calculate the
earnings"

http://www.investopedia.com/articles.../03/092403.asp

Charlie K wrote:
- quote -

I don't believe the 10% penalty applies. This may be true only if the
OP has previous contributions, but it sounds like the OP does.

-Will

"pr" <reavley1[at]comcast.net> wrote in message
news:6fSdnXqu2b8A-TPfRVn-tg[at]comcast.com...
- quote -


I believe the former can help (contributing to an employer-sponsored plan
such as 401(k), SIMPLE, etc.; technically you are forgoing wages in exchange
for future retirement benefits), but not the latter (increasing deductions).

The Roth (and other) IRA income limits are based on modified adjusted gross
income (MAGI). Ignoring for the moment the "modified", um, modifier, AGI is
what one sees at the bottom of page one of a 1040. Deductions (like
charitable contributions) are not subtracted off until later, on page 2.

One of the places that "modified" comes in is that you can't subtract off
deductible IRA contributions in order to reduce your income to qualify for
the deduction (that would be circular :-). So, even though this is
subtracted on page 1, before the AGI bottom line, you have to add it back
when computing your MAGI.

Here's the IRS's description of MAGI (AGI +/- modifications):
http://www.irs.gov/publications/p17/ch18.html#d0e48227

Here's form 1040, so you can see what goes into AGI:
http://www.irs.gov/pub/irs-pdf/f1040.pdf

Another way of reducing one's MAGI is to use tax-exempt, rather than taxable
fixed income investments (MMFs, muni bonds, etc.).
--
Mark Freeland
nBeOwXs[at]pacbell.net

You can recharacterize the Roth excess to an IRA with no penalty. If
you don't want to do that, you withdraw the excess plus any earnings or
minus any loss. Yo pay taxes on the earnings plus a 10% penalty on the
earnings (not on the excess contribution) The IRA custodian should
calculate the earnings. If they don't look in IRS Publication 590.
There is no withholding.

Apologies for stating the obvious - of course, if you are near the Roth
limit, you can still bring down your taxable income below the limit via
options such as increased contributions to pretax retirement programs or
charitable contributions if some such option is available and suits you.

"Publius" <jelgie[at]gmail.com> wrote in message
news:1118591622.435685.258230[at]z14g2000cwz.googlegroups.com...
- quote -

Publius wrote:
- quote -

Some (all?) custodians will figure this for you, but I think you just
take the proportion of earnings that would have been due to your
contribution if your contribution dollars were spread over all your
assets. For example, let's say you had $4000 in your Roth. Then you
contributed $4000 for a total of $8000. Several months later you figure
out that you are not eligible to contribute to a Roth. By this time
your Roth is worth $9000. Then you would take out your original $4000
plus the earnings that were attributable to that $4000. Since your
contribution represented one half of your total Roth value on the day
you made the contribution, one half of the earnings would have to be
withdrawn: $500. You pay ordinary income tax on the $500.

- quote -

Hmm. Not sure.

- quote -

I know that they are not always required to withhold, but there may be
conditions where they are required to.

Good luck,
-Will

Yes, unfortunately I don't have a tax pro... I'll have to get one.

Other questions:

- how do I fairly determine the earnings on the Roth contributions?
- what if there has been a loss?
- will the brokerage firm have to withhold for tax purposes whatever I
withdraw from the Roth?

Publius wrote:
- quote -

Check with your tax pro, but I believe that all you have to do is
withdraw the contributions and earnings for the Roth, and pay income tax
on the earnings.

-Will

I had an unexpected winfall in income this year, which is a good thing,
but it has pushed me over the income limits for contributing to a Roth
IRA -- even though at the beginning of the year, I had already
contributed.

What do I need to do to keep myself in good stead with Uncle Sam?

thanks,
Jamie