Roth IRA penalties...

[Guest RKS]

At the very beginning of the year I contributed the maximum allowable to a ROTH IRA acount, $2000 (two idexes, $1000 each).

I have now realized that I will be over the

maximum AGI for a single person. Do I have to pay a penalty or are there other options. How are the penalties assessed? What if the penalty fees are more than the net gain/loss in the account? thanks.

[Kathy]

RKS:

You do have options! You can remove excess contributions from your IRA as long as you do so before your tax return due date or you can "recharacterize" your Roth contribution to a traditional IRA contribution, again by the tax return due date. It sounds like you need to be in touch with a financial or accounting professional to determine which option is best for you and then with the Custodians of your IRAs in order to obtain the correct paperwork to take care of it. Make sure you act on it early as IRA Custodians get very busy toward the end of the year and tax return filing time and you want to make sure you have plenty of time to correct any errors they may make in following your instructions.

You may also want to take a look at the IRS Publication 590 which can be found at IRS.ustreas.gov in their forms and publications site.