ROTH IRA Problem

[Guest]

I have a Roth IRA problem. I contributed the full $2,000 for my year 2000 contribution in January, 2000. Now my Adjusted Gross Income for year 2000 exceeds $95,000. It's around $102,000. I also invested $2,000 in '98 and '99 (for total contributions of $6,000). My account value has dwindled to $300 thanks to the lousy stock market. How do I resolve my year 2000 contribution if it's now partly ineligible? Thank you.

[Appleby]

You may either: -

a) Determine how much you are eligible to contribute to the Roth, leave that portion in the Roth and recharacterize the difference to your traditional IRA- or distribute the difference as a return of excess contribution or

b) Recharacterize the full amount representing the contribution to your traditional IRA ( or do a return of excess contribution for the full amount

The amount you recharacterize or remove as excess must take into consideration the loss.

This IRS document ( see link below) explains how to determine the loss/earnings on a particular contribution.

http://ftp.fedworld.gov/pub/irs-drop/n-00-39.pdf

[Appleby]

See the worksheet on this page- this will help you to determine how much you are eligible to contribute to a Roth IRA

http://www.irs.ustreas.gov/forms_pubs/pubs...bs/p5900202.htm