On Jul 25, 10:54*am, lawp...[at]gmail.com wrote:
- quote -

Well, I think that you can actually have both with a Roth IRA.

Since we are assuming limited financial resources, the Roth phase-out
doesn't apply.
It is also likely that the taxpayer is in a fairly low tax bracket.

And with a Roth IRA, you can always withdraw the _contributions_ tax
(and penalty) free at any time. That means that you can safely
contribute to the IRA, knowing that in a dire emergency, you can get
the money you put in it out at any time.

The only drawback is that you forfeit any future tax deferred earnings
on the amount withdrawn, since you can't replace it after 60 days.
But it does allow you to move your investment into a tax-free vehicle
while still being able to use the contributed amount if you need to.
And if you don't need to get to the money, you are way ahead on
retirement savings.

--
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On Jul 25, 2:31 pm, dpb <n...[at]non.net> wrote:
- quote -

I think the objectives should be confounded. The premise of economic
inquiries is the best way to allocate scarce resources. I only make so
much per year; with that amount, I have to buy food, housing,
transportation, etc. etc. Part of what I'm doing with my limited
resources is making sure that I have enough money for my day-to-day
expenses, my 'emergency' expenses, and my retirement. So, I have
sometimes conflicting interests with my money. With my emergency fund
and my IRA contributions, I actually have intersecting interests in
some respects.

- quote -

I have my emergency account. Rather than making it unavailable to
myself on Jan 1 and 'fly naked' for the rest of the year, I could keep
it in a liquid asset for 18 months, and put it in the IRA on April
14th of next year. In the meantime, I continue to save, which goes
into my emergency fund, which drains into the IRA at the last possible
moment.

--
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DF2 wrote:

- quote -

You are completely on base.
Someong just posed this question to me, I replied:
1) Pull a copy of Pub 590 from http://www.irs.gov/pub/irs-pdf/p590.pdf
2) Go right to bottom of p32 for an explanation in plain english.

Joe

--
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In misc.taxes.moderated, lawpoop[at]gmail.com wrote:

- quote -

I was thinking you could undo (remove) contributions up until April
15. Is that only for Roth, or am I totally off base?

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

lawpoop[at]gmail.com wrote:
....
- quote -

I think the problem here is you're mixing metaphors (so to speak ).
On the one hand, the IRA (traditional or Roth) is and is designed to be
by tax policy (there, I got the obligatory on topic reference in ) a
long term investment for future use.

You, on the other hand, are confounding that objective w/ the one of
liquidity for near term emergencies. I would suggest what you need to
do is to first develop the emergency fund of some period (some suggest 6
months) of expenses that is in a relatively stable and moderately liquid
investment and when that is done, then work harder on the longer term.

If you're in your 20s as it sounds, there's a long enough time horizon
that even if you cut back from the maximum contribution for a few years
in order to get a comfortable emergency fund in place it won't kill your
retirement down the road.

$0.02, imo, ymmv, etc., etc., etc., ...

--

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Jul 23, 10:26*pm, "D. Stussy" <s...[at]bde-arc.ampr.org> wrote:

- quote -

I wouldn't call it desperate. In an era where a decent job outside of
a major metropolis area is $30k to $40k, having an 'extra' $5k seems
unrealistic. Yes, in Boston, New York, or California, $30-$40k might
be near-poverty wages, but for the vast mnajority of the country,
that's a middle of the road deal. You're asking people to have 1/6 to
1/8 of their yearly income just lying around *before the year even
starts*. Well, I may not have an extra $5,000 at the beginning of the
year, but assuming I'll work the whole year, I stand a good chance of
having it then.

Again, examine the situation of a person in their 20s, making $30-
$40k. They want to save $5,000 in their IRA, so they sock away $418
every month. Say that person finds themselves temporarily unemployed
for 2-3 months, from Oct. to December. If they had put that money in
an IRA immediately, they might have late credit card payments, late
mortgages, late car payments, late student loan payments. If they had
that money in an investment where they could pull it, then they could
keep up their payments, and invest what they had left at the end of
the year. If nothing happens, then they go ahead and put all of it
into the IRA.

I think the wisest course is to save, in vehicle that has liquidity,
and then transfer the maximum of that savings to the IRA just before
April 15th. If you don't have the discipline to save, the whole
conversation is moot. You won't be putting money into an investment
account *or* an IRA. I'm talking about the smartest way to save, when
you don't have much assets.

- quote -

Okay, but I still don't seem the wisdom in the advice. It seems better
to have liquidity, when you don't have much else.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Arthur Kamlet" <kamlet[at]panix.com> wrote in message
news:g68ge9$26i$1[at]reader1.panix.com...
- quote -

Plus the fact that it's tax deferred or tax free (traditional or Roth
respectively) as opposed to fully taxable earnings by keeping it out of the
IRA account. Even a partial contribution at the beginning of the year is
better than none.

If you're that desperate for money, I agree that you probably don't have the
discipline to have an IRA -- else you would have budgeted it for earlier,
where possible. If you can't do it now, what makes you think you can do it
a year from now -- especially if that means putting in the contribution for
the year just closed while also NOT being able to put in for the year just
opened?

I started my IRA the year I turned 21 (a legal requirement of the custodial
account arrangement with a custodian that has stock market access). Every
year except one, I've been able to contribute the maximum (and that one
where I didn't, I still contributed something). For the past 20 years, I've
made my contribution in January of the year the contribution is for --
because I can. My [Roth] IRA is the only retirement plan I have. I don't
have a 401(k) because I'm not someone else's employee. Social security is
predicted to fail during my expected lifetime unless drastically altered. I
shall not be a senior citizen eating dog food in the future.

You asked for advice. You got it. If you don't want to follow it, that's
your choice. We (or at least I) want you to understand what your choice
means.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <e1018756-e585-4f66-9f11-99ca1f8145b8[at]x35g2000hsb.googlegroups.com> ,
<lawpoop[at]gmail.com> wrote:
- quote -


If you qualify for a Roth IRA, that might be an even better
investment, expecially if you;re already thinking you might
not have the discipline to keep the IRA money locked into the IRA.
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Jul 20, 7:10*pm, "D. Stussy" <s...[at]bde-arc.ampr.org> wrote:
- quote -

Actually, that's a very wise idea! I was thinking in boxes.

But then, why lock your money up in an IRA at the beginning of the
year? The 5 grand can accummulate interest in any stocks, bonds, CDs,
mutual funds, regardless of whether it's in an IRA or a traditional
brokerage account.

Say you're relatively young and starting out in life. You want to put
away money in an IRA for tax benefits, but you don't have much
financial cushioning otherwise. Instead of putting that $5k in an IRA,
where there are penalties for pulling it if you need it, why not make
sure it's available in an emergency, for 16 months, until April 15,
but otherwise collecting interest?

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

<lawpoop[at]gmail.com> wrote in message
news:d1a36917-9953-470a-a776-3265f36ae4b4[at]d77g2000hsb.googlegroups.com...
- quote -

You assume that everyone invests their IRA funds in the stock market. They
don't. Some choose bonds. Even some put it in CDs. The advice is the same
regardless of the investment - delaying a year loses one year's worth of
growth regardless of where it's put.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Jul 3, 4:52*pm, "D. Stussy" <s...[at]bde-arc.ampr.org> wrote:

- quote -

You see a bull market, so therefore the wisest thing to do is put all
the money in early, so that you get an extra year's interest.

I see a bear market, so to me, the wisest thing to do is to put the
money in at the last possible moment, to minimize the short term
losses, while still getting the long-term tax benefits.

However, no one knows what the market will do. The most prudent course
is to put a fixed amount in periodically; using dollar-cost averaging,
you automatically buy more when the price is low, and less when the
price is high.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

<lawpoop[at]gmail.com> wrote in message
news:058b130f-a374-4ab0-a654-b4b53c131e73[at]f63g2000hsf.googlegroups.com...
- quote -

OK. That's your choice. However, regardless of whether you had budgeted it
or not, it happened, so it could have been simpler to leave it there (as a
2008 contribution). Why wait until next year to put in the 2008 amount?
You lose a year's worth of time to accumulate earnings.

Unless there's some specific financial reason that says otherwise, the
maximum contribution to each and every tax-advantaged account a taxpayer has
should be made as close to the beginning of each of the taxpayer's tax years
as possible (January 1 for most individuals), or as soon as he knows he
qualifies to do so. In some cases, it may even be better to make the
contribution even if it means paying one's taxes late.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Jun 28, 2:34*am, "D. Stussy" <s...[at]bde-arc.ampr.org> wrote:
- quote -

I hadn't budgeted to make that much of a contribution to my 2008 IRA
already. That chunk was supposed to go to my taxes -- I'm 1099.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Phil Marti" <prm20871[at]verizon.net> wrote in message
news:Zqq9k.51$al3.33[at]trnddc06...
- quote -

Right, and the first payment of the contribution was so designated. The
second transfer had no designation whatsoever, but based on the date, it
could be either 2007 or 2008. Clarification after the fact isn't forbidden.
Technically, if the first contribution was the maximum for 2007, then the
custodian should have automatically either rejected the second transfer or
automatically considered it as 2008 contribution.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"D. Stussy" wrote:

- quote -

Since "recharacterize" is a term of art in IRA law and doesn't apply to this
situation, a clarification.

When I make an IRA contribution I have to specify the tax year it's for. I
have heard that some custodians will accommodate the taxpayer in cases like
OP's and change the contribution year after the fact, but I know of nothing
that requires them to (and I'm not sure they're allowed to).

--
Phil Marti
Clarksburg, MD

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

<lawpoop[at]gmail.com> wrote in message
news:5d81e86d-9d46-4a0f-a674-345d9c7f5363[at]t54g2000hsg.googlegroups.com...
- quote -

Since you had already made the investment, why didn't you have the second
amount recharacterized to be your 2008 contribution? There was no reason to
withdraw it (unless you know that you won't qualify to contribute in 2008).
No penalty. No 1099-R/5498 coding mess.

- quote -

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Jun 24, 1:37*am, "Phil Marti" <prm20...[at]verizon.net> wrote:


- quote -

Well, it wasn't on the same day; it was a few days, perhaps a week or
more later, when I looked at my bank accounts and saw that too much
money had gone out. But, it was done before the 15th.

I'll read over publication 590.

- quote -

Thanks, Phil!

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Jun 23, 9:02*pm, lawp...[at]gmail.com wrote:

- quote -

Hmmm. I would have thought that a nicer solution would have been to
just treat the excess as a 2008 Roth IRA contribution instead. That
would have left things in place and given an extra year for the assets
to appreciate. Since this was after Jan. 1, 2008 an IRA contribution
for 2008 is certainly allowed (unless of course, you may end up not
being eligible to contribute in 2008).

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

<lawpoop[at]gmail.com> wrote:

- quote -

If you really want to get steamed at your broker, rely on them for tax
advice. You got one of the few who didn't just make something up when you
inquired.

Since the money was distributed in 2008 you'll get a 2008 Form 1099-R in
2009. It will be coded to indicate that it's a transaction that should have
been reported on your 2007 return. (See below)

- quote -

No. You would have owed a 6% penalty.

- quote -

Neither. As I understand your narrative you got the money out the same day
you put it in, so there were no earnings. Since you withdrew the excess
before the extended due date of your 2007 return there's no excess
contribution penalty, and since there were no earnings there's no premature
distribution penalty. See Publication 590.

- quote -

You should have reported the return of excess contributions on your 2007
return, line 15. Your choices are to wait until IRS inquires, if they ever
do, or to file an amended return on Form 1040-X to explain what happened.

See the instructions for Form 8606.

--
Phil Marti
Clarksburg, MD

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Hello all -

Before the March 15th, 2008 deadline, I transferred money to my online
brokerage to max out my 2007 contributions to my Roth IRA. However, I
accidentally transferred too much ( I did a transfer twice ). I called
my broker before the 15th, and the operator said they would take care
of it. I got the money back.

However, the 5498 I got from my broker showed the amount that had too
much money! When I called them, they said that they had to report all
the contributions, and that the money taken out would show up as a
dispersement ( or whatever ) from my IRA in the forms for tax year
2008.

So I'm steamed at my broker for not explaining how they were going to
'fix' my situation.

Questions:

1. Would I have been better off to let too much money to be in there
as contributions in 2007?

2. Will I be penalized both for contributing too much and also early
withdrawals?

3. Should I write to the IRS and try to explain the situation, or just
accept my penalties?

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >