Incorrect IRA deposit

Taxes General Forum - Tax professionals meeting place and answers to queries. (Moderated) 

Yahoo!   Google   Windows Live   del.icio.us   digg   Netscape

Subject Author Date Incorrect IRA deposit Dick Adams 10-14-2008  Re: Incorrect IRA deposit Phil Marti 10-14-2008  Re: Incorrect IRA deposit Arthur Kamlet 10-14-2008  Re: Incorrect IRA deposit Gil Faver 10-14-2008  Re: Incorrect IRA deposit Arthur Kamlet 10-14-2008  Re: Incorrect IRA deposit Alan 10-14-2008  Re: Incorrect IRA deposit Arthur Kamlet 10-14-2008  Re: Incorrect IRA deposit Alan 10-14-2008
Posted by Dick Adams on October 14, 2008, 12:39 am Please log in for more thread options Taxpayer who is covered by an employer pension plan (I believe it is either a 403B or a 401K) made deposits in an IRA for 2007 and 2008. I believe the 2008 deposit can be corrected by selling the stock and reporting the gain or loss. But can the 2007 deposit be corrected or does the taxpayer have to wait until the distribution age to sell it without paying an early distribution penalty. My cousin who thinks I know taxation asked me this. I told her I'd get back to her in a few days. Dick -- << ------------------------------------------------------- >> << 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. >> << ------------------------------------------------------- >> Posted by Phil Marti on October 14, 2008, 2:08 am Please log in for more thread options "Dick Adams" wrote: > Taxpayer who is covered by an employer pension plan > (I believe it is either a 403B or a 401K) made > deposits in an IRA for 2007 and 2008. I believe > the 2008 deposit can be corrected by selling the > stock and reporting the gain or loss. But can > the 2007 deposit be corrected or does the taxpayer > have to wait until the distribution age to sell it > without paying an early distribution penalty. I'm confused by your choice of subject lines. Why were these contributions incorrect and in need of fixing? Being covered by an employer plan doesn't disqualify one from making IRA contributions. It may mean that a traditional IRA contribution isn't deductible, depending on AGI. Anyway, it's not too late to "undo" a 2007 contribution. That can be done through 10/15/2008 regardless of whether or not the taxpayer got an extension to file. Before doing so though, make sure that's a wise course of action. If positive earnings are distributed (not likely) the 10% penalty applies to the earnings. Details are in Pub 590. -- 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. >> << ------------------------------------------------------- >> Posted by Arthur Kamlet on October 14, 2008, 11:46 am Please log in for more thread options >"Dick Adams" wrote: > >> Taxpayer who is covered by an employer pension plan >> (I believe it is either a 403B or a 401K) made >> deposits in an IRA for 2007 and 2008. I believe >> the 2008 deposit can be corrected by selling the >> stock and reporting the gain or loss. But can >> the 2007 deposit be corrected or does the taxpayer >> have to wait until the distribution age to sell it >> without paying an early distribution penalty. > >I'm confused by your choice of subject lines. Why were these contributions >incorrect and in need of fixing? Being covered by an employer plan doesn't >disqualify one from making IRA contributions. It may mean that a >traditional IRA contribution isn't deductible, depending on AGI. > >Anyway, it's not too late to "undo" a 2007 contribution. That can be done >through 10/15/2008 regardless of whether or not the taxpayer got an >extension to file. Before doing so though, make sure that's a wise course >of action. If positive earnings are distributed (not likely) the 10% >penalty applies to the earnings. > >Details are in Pub 590. Phil is right. A nondeductible IRA contribution is not limited by AGI or even filing status. And it can be a nondeductible contribution, and the form 8606 can be filed now if not already filed. If it was deducted, amend the 2007 to remove the improper deduction. -- 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. >> << ------------------------------------------------------- >> Posted by Gil Faver on October 14, 2008, 12:12 pm Please log in for more thread options >>"Dick Adams" wrote: >> >>> Taxpayer who is covered by an employer pension plan >>> (I believe it is either a 403B or a 401K) made >>> deposits in an IRA for 2007 and 2008. I believe >>> the 2008 deposit can be corrected by selling the >>> stock and reporting the gain or loss. But can >>> the 2007 deposit be corrected or does the taxpayer >>> have to wait until the distribution age to sell it >>> without paying an early distribution penalty. >> >>I'm confused by your choice of subject lines. Why were these >>contributions >>incorrect and in need of fixing? Being covered by an employer plan >>doesn't >>disqualify one from making IRA contributions. It may mean that a >>traditional IRA contribution isn't deductible, depending on AGI. >> >>Anyway, it's not too late to "undo" a 2007 contribution. That can be done >>through 10/15/2008 regardless of whether or not the taxpayer got an >>extension to file. Before doing so though, make sure that's a wise course >>of action. If positive earnings are distributed (not likely) the 10% >>penalty applies to the earnings. >> >>Details are in Pub 590. > > > Phil is right. A nondeductible IRA contribution is not limited by > AGI or even filing status. And it can be a nondeductible contribution, > and the form 8606 can be filed now if not already filed. > > If it was deducted, amend the 2007 to remove the improper deduction. Isn't the record keeping for having both deductible and nondeductible IRA contributions in a traditional IRA a real PITA? Maybe makes more sense to back out the nondeductible 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. >> << ------------------------------------------------------- >> Posted by Arthur Kamlet on October 14, 2008, 12:18 pm Please log in for more thread options > >>>"Dick Adams" wrote: >>> >>>> Taxpayer who is covered by an employer pension plan >>>> (I believe it is either a 403B or a 401K) made >>>> deposits in an IRA for 2007 and 2008. I believe >>>> the 2008 deposit can be corrected by selling the >>>> stock and reporting the gain or loss. But can >>>> the 2007 deposit be corrected or does the taxpayer >>>> have to wait until the distribution age to sell it >>>> without paying an early distribution penalty. >>> >>>I'm confused by your choice of subject lines. Why were these >>>contributions >>>incorrect and in need of fixing? Being covered by an employer plan >>>doesn't >>>disqualify one from making IRA contributions. It may mean that a >>>traditional IRA contribution isn't deductible, depending on AGI. >>> >>>Anyway, it's not too late to "undo" a 2007 contribution. That can be done >>>through 10/15/2008 regardless of whether or not the taxpayer got an >>>extension to file. Before doing so though, make sure that's a wise course >>>of action. If positive earnings are distributed (not likely) the 10% >>>penalty applies to the earnings. >>> >>>Details are in Pub 590. >> >> >> Phil is right. A nondeductible IRA contribution is not limited by >> AGI or even filing status. And it can be a nondeductible contribution, >> and the form 8606 can be filed now if not already filed. >> >> If it was deducted, amend the 2007 to remove the improper deduction. > > >Isn't the record keeping for having both deductible and nondeductible IRA >contributions in a traditional IRA a real PITA? Maybe makes more sense to >back out the nondeductible contribution. Depends on your threshold for annoyance. Having any nondeductible Traditional IRA contributions means using and saving the last 8606. Speaking for myself, after I've worked this for the first few hundred 8606s, it becomes pretty routine and simple. -- 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. >> << ------------------------------------------------------- >> Similar Threads Posted Lost deposit (forfeited deposit) March 20, 2007, 3:24 pm refusal to change incorrect W2 November 20, 2009, 4:47 pm efile - incorrect date of birth April 3, 2007, 2:07 am Incorrect CT 1040-x Filing, Any Options? October 30, 2007, 11:47 pm Tuition Grant misreported wrong year and incorrect exempt status February 4, 2009, 6:42 pm Rental deposit ? ? ? April 3, 2007, 2:07 am Can I deduct a lost RE deposit? February 17, 2007, 4:58 am Deposit US Treasury Check when outside US? July 27, 2008, 1:52 pm Are we missing form for rollover deposit? April 8, 2008, 12:52 am Experiences with direct deposit of refund October 6, 2008, 11:02 am