Jim Reynolds wrote:

- quote -

The IRS is correct. You did not have an excess contribution
as you were allowed to contribute the $3000. Obviously, you
must have been an active participant in a retirement plan at
work and your AGI was too high to take a deduction. You are
stuck with filing an amended return and paying the tax and
penalty as it is too late to recharacterize the
contribution.

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jreynold[at]nyx2.nyx.net (Jim Reynolds) wrote:

- quote -

You didn't make excess IRA contributions. Excess would be a
contribution above the $3,000 limit.

- quote -

I don't know of any problem with mixing deductible and
non-deductible contributions. There used to be a problem
with mixing contributory and rollover accounts, but I
believe that restriction has been removed.

- quote -

I think you're stuck, and you're forced to save for
retirement without being taxed.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

jreynold[at]nyx2.nyx.net (Jim Reynolds) writes:

- quote -

The IRS agent is right. You're confusing the ability to
make a contribution with the ability to deduct the
contribution. The only restriction on the ability to make a
traditional IRA contribution is to have earned income
greater than or equal to the amount of the contribution.
Since, presumably, that wasn't an issue for you, you did not
have an "excess IRA contribution."

But even if you had made an actual excess contribution, it's
moot because the deadline to undo an 2004 IRA contribution
ab initio was October 15, 2005 (if not earlier).

By missing that deadline, you cannot undo the contribution.
The only way to get the money now is to make a distribution,
subject to the standard early withdrawal rules.

But there's no (tax) reason why you can't just amend your
return, file the 8606, pay the tax, and leave the money in
there.

- quote -

That's not true. However, if you make a distribution (as
opposed to a before-the-deadline reversal), the post-tax
money only comes out pro-rata.

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

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"Jim Reynolds" <jreynold[at]nyx2.nyx.net> wrote:

- quote -

Although you don't specifically say so, we'll assume that
you were legally able to make the contribution, you just
couldn't deduct it.

- quote -

If my assumption was correct, there is no excess
contribution to be returned.

- quote -

Nonsense. You report the nondeductible contribution on Form
8606, Part I. When you take distributions from your IRA each
will be a mix of taxable and nontaxable distributions, which
you will also compute in Part I of the 8606.

- quote -

Right.

--
Phil Marti
Clarksburg, MD

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

In April,2004 I made a deductible IRA contribution when I
was not eligible to do so. I understand that I have to pay
tax+interest on the $3000 and that by filing Form 8606 my
basis will be adjusted accordingly.

However, I'd like to somehow "undo" that contribution
entirely-- pay the tax I avoided (plus interest) and get my
$3000 back without penalty. It seems like this would be a
"Return of Excess IRA Contributions" scenario, but the IRS
agent says NO.

There was already money in the IRA and apparantly mixing
taxable+nontaxable funds is a big no-no that really limits
your options. Aside from waiting until age 59 1/2 or closing
out the IRA completely (triggering a big tax), there's
nothing I can do get my money back without paying 10%
penalty.

IRS rep says I'm stuck. Can anyone think of other avenues to
explore?

Thanks in advance!

Jim.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >