Question about ROTH IRA contribution

[Guest slash47]

I have a question on the Roth IRA contribution which I am not clear on.

Last year, 2004, I didn't make a ton of money because of school which I made about $1,500 in wages.

This year, 2005, I am making about $50,000 in wages.

Prior to April 15th, I made a $3,000 contribution to my IRA for the year of 2004.

Am I allowed to do this? If so, can I roll it over to 2005 or do I report it to the IRS and pay a tax on it?

[John G]

You can not contribute more than your earning income for 2004.

Call your custodian - you may be able to reclassify the overage as 2005. I have no idea if this is legal, but retro attribution of calendar year seems to happen a lot.... because lots of folks including custodians make mistakes.

If they can't do this, you then talk with them about plan B and what they require to get it corrected. The faster you act on this, the more likely you won't have penalties imposed.

[Guest andyr]

I agree that $1,500 of the contribution that you made in 2005 can be applied to 2004. The remaining $1,500 can be applied to 2005 and you can add an additional $2,500 if you wish or $3,000 if you will be age 50 in 2005. Because contributions to a Roth IRA are not deductible, I do not believe that these changes will generate any tax liability for you. If you have already filed your 2004 tax return, you should see your tax advisor to determine if you have to file an amended return or Form 8606.