metalmagpie

So as long as I file the brokerage firm's form requesting to remove an excess contribution at the time I request the IRA disbursement, they will file a 1099-R which indicates to the IRS that the disbursement isn't taxable? Thank you, thank you! metalmagpie

I am a retired engineer. I have a traditional rollover IRA. I am currently living off IRA distributions, which of course are considered ordinary income. Back in 2013 I had made a sizable withdrawal to cover the fourth quarter of that year. Then my father's estate cleared probate and I received a sizable check. I didn't need the money I'd withdrawn from my IRA and wished I'd not withdrawn it. Not realizing that I can only contribute earned income (i.e. W2 income), I made a contribution of $6500 back into my IRA. This was a mistake on my part. I recently received a Notice CP2000 from the IRS. They take exception to that IRA contribution from 2013 as they should. They want me to pay now the amount I failed to pay with my 2013 taxes, but didn't because of the (erroneous) IRA contribution which I'd deducted from my 2013 income. I don't have a problem with this. Once I send them this payment, then I will have paid the income tax for withdrawing that $6500 back in 2013. However, the money will still be in the account. I understand that I need to withdraw not just the $6500 but also any earnings it made. I have requested the form to withdraw an excess contribution from my brokerage firm (where my IRA is). Their form states clearly that they (the brokerage firm) will calculate the earnings for me. When I make the withrawal of the excess contribution plus earnings, I wlil have to file a Form 5329 which will calculate the penalty taxes (something like 6% of the contribution) along with payment. At that point I will have paid both the income tax due me and the penalty tax. However, when I make the excess contribution withdrawal, won't that withdrawal be reported to the IRS as taxable income? And if so, wouldn't that be double taxation? Thanks for reading this. I've tried to be as clear and precise as I can. metalmagpie