I've already contributed some money to my 2007 Roth IRA. However, I just learned that I will be receiving much more income this year than I expected and I will be over the Roth IRA income limit to contribute. What do I do? I talked to my IRA custodian to see if I could move the money out and they said it would be considered a cash distribution and be subject to all the early withdrawal fees. Any suggestions would be greatly appreciated - as you can imagine it is difficult to search the web for answers to a question like this. Also - a bit more info - I maxed out my 2006 contribution last year, so applying the money to 2006 is not an option.

Thanks

See page 62 of Publication 590.

(Especially "Withdrawal of excess contributions." and "Applying excess contributions.")

Was the amount contributed to a type of fixed investment, such as a certificate-of-deposit? Just want to understand why the early withdrawal penalty would apply.
Another option would be to recharacterize the excess amount to a Traditional IRA. This would allow you to keep the amount as an IRA contribution, just in a different type of account.

The money that I contributed is just sitting in cash right now. I will call my account administrator and see if I can recharacterise it - that sounds like a great idea. If not, I guess I will just have to suck it up and pay the 6% excise tax when I file next year.

Thanks for the feedback, all!

You would pay the 6% excise tax only if the excess only if it is not removed from the Roth IRA by October 15 of next year .
If you decide not to recharacterize the amount to a Traditional IRA, removing the excess amount by the deadline, along with an NIA would correct the excess without penalty.
See post at http://benefitslink.com/boards/index.php?showtopic=35097