Mistakenly opened IRA

[Guest Rcrich]

Opened a traditional ira in my wife's name for the tax break, this year. Didn't realize she is in a retirement plan at her work and our income is too high for the contribution to be tax deductible. It just funded today. Any way to get out of it and/ or transfer it to my name so we can get the tax break. My income doesn't involve a retirement plan.

If I am stuck with it, am I correct that I have put already taxed money into an account that is going to be taxed again when we withdraw it at 59 1/2?

I know, stupid!...thanks for any info

[ESOP Guy]

I am not a huge IRA expert. But I do know you will not be taxed twice.

Here is the link to an IRS pulication. (By the way while talking to the IRS is a hit and miss deal their publications often times answer most if not all questions and the answer is correct. So I am saying it is a great place to start instead of chat boards. This one is full of very knowledgable people but many are not.)

http://www.irs.gov/publications/p590/ch01.html

You will want to look under non-deductable contributions and taxable and non-taxable distributions.

The short answer is for the non-deductable contribution you have a cost basis in the IRA you have to track. I bit of pain and more paperwork but you will not pay taxes twice if you do it right.

I have no idea if you can undo the IRA or transfer it.

[Jim Chad]

You might want to leave it in and convert it to Roth

[GMK]

^Yes. An excellent suggestion, Mr. Chad.

[Guest Rcrich]

Found this on IRS....applys to my situation

The trustee or issuer (sometimes called the sponsor) of your traditional IRA generally must give you a disclosure statement at least 7 days before you open your IRA. However, the sponsor does not have to give you the statement until the date you open (or purchase, if earlier) your IRA, provided you are given at least 7 days from that date to revoke the IRA.

The disclosure statement must explain certain items in plain language. For example, the statement should explain when and how you can revoke the IRA, and include the name, address, and telephone number of the person to receive the notice of cancellation. This explanation must appear at the beginning of the disclosure statement.

If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. The sponsor must report on the appropriate IRS forms both your contribution to the IRA (unless it was made by a trustee-to-trustee transfer) and the amount returned to you. These requirements apply to all sponsors.

[masteff]

You should really look at the publication linked to above, specifically Worksheet 1-2. Your ability to make a deductible contribution might be limited as well.