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Posted by Phil Marti on February 27, 2007, 10:11 pm
Please log in for more thread options >> I'm assuming that the 2005 contribution shows no earnings
>> because they were lumped with the 2006 earnings. That threw
>> me at first, but it makes sense. Since you didn't correct
>> the 2005 excess by the extended due date of your 2005 return
>> it carries over as an excess to 2006. Thus, you wound up
>> with an $8,000 excess for 2006, which you are correcting by
>> the extended due date.
> Don't know if it matters as far as what I need to do but my
> understanding is the $300 earnings in 2006 were all from
> 2006. I think they told me the reason they did not take out
> any earnings from 2005 was because I did not correct the
> 2005 excess contribution by the extended due date and thus
> any earnings get left in there.
It basically works out the same. What's being distributed
in correcting the 2006 excess contribution is earnings on
the full $8,000.
>> 2005 File a 2005 Form 5329, Part IV, by itself. You can
>> get prior year forms at www.irs.gov. You'll pay the $240
>> penalty with that form. They'll bill you for the interest.
> Ok, do I also need to file an amended 1040 (1040x) with that
> 2005 form 5329?
No.
> Also I thought I read somewhere that I have to pay the 6%
> penalty for each year that the excess contribution was left
> in there, is that correct?
Kinda, sorta, not really. The excess gets penalized if not
corrected by the extended due date of your return for the
calendar year. In your case you'll have it fixed so the
penalty doesn't apply for 2006.
<snip>
>> 2006 Include the $300 earnings on line 15b of your 1040.
>> You'll owe a $30 penalty on line 60 of the 1040.
>>
>> 2007 You'll report the $100 earnings and $10 penalty on
>> your 2007 return you file next year.
> Ok, do I need to file a 5329 or 8606 for 2006 or 2007?
Not for 2006. Have to wait and see how your 1099-R's are
coded for 2007 to see exactly what you'll need to do on that
one.
--
Phil Marti
Clarksburg, MD
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