Help! $5000 excess Roth IRA contribution to Vanguard in 2002

[Guest sundance6]

I just discovered that I contributed $5000 to a Vanguard Roth IRA for the year 2002. The IRA was in two different accounts (Index 500 - July, 2002 and money market - March, 2003). I do not know where to begin to straighten this out.

[mbozek]

Check the custodial account agreement and and forms you sent in to see if the march 2003 contribution was allocated to the 03 year. If not then see the penalties provision in IRS pub 590 to determine how to fix it. Usually you must withdraw the excess from the account and pay a 6% tax.

[Guest Fishchick]

You should be able to remove the excess that was made in 2003 by your tax-filing deadline for 2003 . If you file on time or get an extension by your regular deadline, you get an automatic extension until October 15th, 2004. If you are able to take care of this in this manner, you will remove the excess plus the earnings (or if losses, the amount returned will be reduced) attributable to the excess, and you will owe taxes only on any earnings. Call Vanguard to find out their process for doing a Return of Excess distribution. It sounds like your excess amount is actually either $2000 or $2500, not the entire $5000. The contribution limit for 2002 was $3000 with a $500 catch-up contribution available for individuals over age 50.