Tad Borek wrote:
- quote -


"...and any attributed earnings". Dang. I thought I had found the
proverbial Free Lunch.

Thanks, :-)
Bob

zxcvbob wrote:
- quote -

Yes, you take out the excess contribution and any attributed earnings,
and they're taxable in the year of the contribution. See:
http://www.irs.gov/publications/p590/ch01.html#d0e5150

-Tad

You are putting more money into the account than you have earned
income. So you are obligated to pay taxes on the excess interest. You
aren't going to get a 1099 tax statement for interest in a ROTH. You
are just going to raise red flags with the IRS when you pay taxes on
interest in a ROTH account. If you don't pay taxes, this looks like
fraud.

Every kid in America with no earned income would be putting $4,000 into
a Roth and taking out the principle at the end of the year if this were
legal. Money would accumulate in the Roth with no earned income
whatsoever.

Feel free to ask a real accountant, because tax codes aren't required
to make sense.

If one contributes too much in an IRA in a given tax year and withdraws the
excess at the end if the year, does any earnings have to be withdrawn too?

Example: A teenager has a Roth IRA and unpredictable earnings every year
from odd jobs. When Daddy does the kid's taxes every year, he makes an IRA
contribution on behalf of the kid up to the maximum allowed (usually
limited by the kid's earned income.) Suppose instead of waiting till next
year when the kid's earned income is known, Daddy contributes $4000 in
January in anticipation of what the kid might earn. Then in December,
withdraws the excess. (Daddy is a custodian of the account.) Maybe the kid
only had $1000 of earned income that year. Would Daddy only have to
withdraw $3000, or would he also have to withdraw any earning attributable
to that $3000?

Hypothetically, the kid may have *no* earned income in a particular year,
but if the account earned 10%, it would be a way to get $400 in anyway.
(Of course, this gets sticky if the account actually loses money that
year.) The extra few hundred dollars could be significant when allowed to
compound for 50 years (when the kid is eligible to retire.)

Bob