Excess Roth IRA Contribution

[Guest IRA-Excess]

While preparing my Tax Year 2007 tax return, I just discovered I exceeded my tax Year 2006 Roth IRA contribution limit (limited by MAGI) by $570. I have read so many descriptions of how to correct this that I am completely lost. I have also exceeded my my 2007 limit, but I'm pretty clear about how to handle that prior to April 15, but cleaning up the previous year's situation has me confused. Any advice from someone who has navigated - or knows for sure how to navigate - this would be most appreciated.

[Appleby]

Since you did not remove the 2006 excess by the deadline, it became a 2007 Roth IRA contribution and you owe the IRS a penalty of 6% on the amount for 2006.

Since you already exceeded your 2007 Roth IRA contribution, you need to remove it from your Roth so as to avoid another 6% penalty

[Guest IRA-Excess]

Thank you. Yesterday I called the IRS help line, explained my situation and was told I was not allowed to apply my excess from either year to any other year, that I had no options, that I must (1) remove the 2006 excess contribution, (2) pay the 6 percent penalty on it for both 2006 and 2007, (3) pay a 10% fine (4) withdrawal my 2007 excess contribution plus interest, (5) include the interest on the 2007 excess as 2007 income and (6) write a letter to the IRS explaining the excess contributions and corrective actions taken. I called just trying to make sure I corrected my honest mistake properly, but the agent with whom I spoke treated me like I was a criminal - she got very indignant when I asked why I could not apply the 2006 excess to 2007, telling me that excess contributions can never be applied to a subsequent year. I know that is wrong from reading IRS P-590, so now I doubt the accuracy of everything she told me.

[Guest kuasa]

Thank you. Yesterday I called the IRS help line, explained my situation and was told I was not allowed to apply my excess from either year to any other year, that I had no options, that I must (1) remove the 2006 excess contribution, (2) pay the 6 percent penalty on it for both 2006 and 2007, (3) pay a 10% fine (4) withdrawal my 2007 excess contribution plus interest, (5) include the interest on the 2007 excess as 2007 income and (6) write a letter to the IRS explaining the excess contributions and corrective actions taken. I called just trying to make sure I corrected my honest mistake properly, but the agent with whom I spoke treated me like I was a criminal - she got very indignant when I asked why I could not apply the 2006 excess to 2007, telling me that excess contributions can never be applied to a subsequent year. I know that is wrong from reading IRS P-590, so now I doubt the accuracy of everything she told me.

Well, I hope more people chime in here. I have similiar situation. While filing 2007 tax few days back found out I don't qualify to contribute to roth ira for 2007.

I have already contributed for 2007 last year in may. Also contributed for 2008 in march. What to do? Start researching and made phone call to IRS and TD Ameritrade where my roth ira account is. I have been contributing since 2005.

TD ameritrade asked me to fill up a form "Removal of Excess". In this form they have an option where it says "Do I want them to withdraw tax". I left it blank since this is roth ira and i am removing complete amount for 2007. Well, they took 10% tax out and sent to IRS.

Now, what do I do. I have done the removal befoe the tax due date for both 2007 and 2008. According to pub 590, they should be considered never contributed. I decided to put that money to traditional IRA as non deductible contribution. I could have recharacterize, but didn't know this before withdraw.

Now, what else I need to do. TD ameritrade is telling me they will send 1099-R with code J8 on line 7. If I put that code as to practice on my tax software it is applying tax and penalty on the entire amount. This is not right.

I seem to get no good answer about how to handle this situation from IRS or TD ameritrade.

I filled by 2007 tax as no contribution to roth IRA and 4000 dollar to traditional non deductible ira and wrote a letter about my excess contribution in 2007 and sent along with my tax return. Fortunately or unfortunately I have loss on my 2007 money. So basically no earning just loss. I calculated my loss and took the right amount out.

Now, what else I need to do? I know TD ameritrade is going to send me 1099-R. If they send one for 2007, how I am going to incorporate on 2008 tax return. Or do I need to file ammend tax return. Also, even I can incorporate it is taxing me on whole amount means the contribution amount plus any earning. Does the TaxCut software has bug. How to fill up this section?

Anybody help, help..