Rich Carreiro wrote:
- quote -

1) Remember that "fixing it" includes the case where you
made less than the maximum contribution since.

2) If your 1999 return was timely filed, the period of
limitations has since expired on it. Although that in
itself may not protect the open years (currently, timely
filed 2001-2003 returns), it might be enough to protect
calling the overcontribution an "excess." (I suggest
researching this topic through court cases to find out.)
IRC 4973(a) states that the excess is "determined as of the
close of the taxable year." In general, any determination
or redetermination is subject to the assessment period of
limitations (unless subject to some other period; e.g.
collection) - so you might be off the hook. Whether or not
they can make a determination for a closed year to assess
the excise tax in an open year is the "gray area" that needs
research - but may be easier for them to do than not.

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apad1307[at]computermail.net (Allan) writes:

- quote -

You have it sorta backwards. If you *don't* fix it you
pay a 6% penalty ($30 in this case) every year until
you *do* fix it. And then in the year you fix it you will
pay an additional penalty of 10% of the earnings on
that $500.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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I have just recently discovered (on my own) that in 1999, I
made an excess contribution to my IRA. The excess amount is
only by $500, but from what I understand, if I try to fix
this, I have to pay a 6% penalty for each year, plus 10% on
earnings. My question is should I bother correcting this,
considering it's been over 5 years ? and I have never heard
anything from the IRS about this ? Is there a time limit
after which the IRS can no longer audit this ?

I don't mind paying the penalties incurred, but the fact
that I have to get a cpa to reamend all my returns from the
last 5 years alone would cost me a bundle, a lot more than
the excess contribution + penalties. Any advise on what I
should do, if anything, from someone who has experience in
this ? Thank you so much.

Allan

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