Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (14) | Ignore Thread Prev Thread | Next Thread
Author: TerryMcK Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121223  
Subject: F/UP TMFPMarti, IRA Excess Contrib Date: 3/1/2008 10:00 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Phil, the following was in your response to my question on the IRA excess contribution (due to no earned income in 2007).

Call the IRA custodian(s) and tell them that you need to withdraw the contributions and earnings. They'll take it from there.

The earnings, if positive, will be 2007 income which you must report on your 2007 return. Positive earnings are taxable income on your 2007 return. If either of you is under 59 1/2 at the time positive earnings are distributed there will be a 10% premature distribution penalty on that spouse's earnings.

You will not receive a 2007 1099-R. Period. In January 2009 you will receive a 2008 1099-R showing the distribution. We'll worry about that at that time.

Once you find out the amount of earnings you're withdrawing get back to us, and we can figure how how to trick TT into putting the right numbers in the right places.

Phil


I made the withdrawal from both Roth IRAs at Fidelity. There was a $5K deposit in each in 2007. The result was a distribution of $4885 from one (loss) and $5443 from the other (gain). When I first called Fidelity they told me that I would get a 1099-R. However when I went to the office to do the transaction they told me that I wouldn't and I would have all the info I needed to file this with my 2007 return.
Print the post Back To Top
Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 99174 of 121223
Subject: Re: F/UP TMFPMarti, IRA Excess Contrib Date: 3/2/2008 9:34 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
I made the withdrawal from both Roth IRAs at Fidelity. There was a $5K deposit in each in 2007. The result was a distribution of $4885 from one (loss) and $5443 from the other (gain).

So now we're ready for TurboTax. Create 2 1099-R's.

#1: Box 1 $5443, Box 2 $443, Box 7 1, and check the IRA box.

#2: Box 1 $4885, Box 2 $0, Box 7 1, and check the IRA box.

This should give you $443 on line 15b and $44 on line 60 of the 1040.

Phil

Print the post Back To Top
Author: TerryMcK Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 99175 of 121223
Subject: Re: F/UP TMFPMarti, IRA Excess Contrib Date: 3/2/2008 8:52 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Phil,
A few questions....

1. Since I don't actually have the 1099-R for the Distribution, do I need to complete the 4852 that is suggested for when there is no 1099-R available ?

2. Box 7, selection 1 is for Early Distribution, except Roth.
My situation is a distribution from a Roth IRA, and I'm retired and over 59 1/2. Is this considered early Distribution because I'm taking the last $5K and it has not been in the account for 5 years ? If so, should I be using code J.

Finally, does this offset the penalties, etc. from reporting the excess contribution ?

Thanks, I appreciate your help.

Terry

Print the post Back To Top
Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 99176 of 121223
Subject: Re: F/UP TMFPMarti, IRA Excess Contrib Date: 3/2/2008 8:59 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
1. Since I don't actually have the 1099-R for the Distribution, do I need to complete the 4852 that is suggested for when there is no 1099-R available ?

No. Remember, none of this is going to the IRS. You just need to trick TT into putting the right numbers in the right 1040 places.

2. Box 7, selection 1 is for Early Distribution, except Roth.
My situation is a distribution from a Roth IRA, and I'm retired and over 59 1/2. Is this considered early Distribution because I'm taking the last $5K and it has not been in the account for 5 years ? If so, should I be using code J.


See #1. (Also remember not to tell TT that you made Roth contributions in the first place.)

Finally, does this offset the penalties, etc. from reporting the excess contribution ?

I assume you mean whether you avoid the 6% excess contribution penalty. You've already done that, with the exception of reporting the positive earnings on your 2007 return. This takes care of that.

Phil

Print the post Back To Top
Author: jlars One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 99180 of 121223
Subject: Re: F/UP TMFPMarti, IRA Excess Contrib Date: 3/3/2008 8:57 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 3
I just wanted to admit that it took me a minute to realize that "F/UP" stands for "Follow-up."

Reading Phil on this board as long as I have, I should have know that it couldn't have been the other one.

jlars

Print the post Back To Top
Author: TerryMcK Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 99191 of 121223
Subject: Re: F/UP TMFPMarti, IRA Excess Contrib Date: 3/3/2008 3:11 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I'm curious as to why you suggest using the Code1 for IRA distribution. Since all I have is Roth IRAs and if this is not going to show to the IRS.

When all of this is said and done for 2007, what happens when Fidelity sends me a 1099-R in 2008 next year.

Print the post Back To Top
Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 99193 of 121223
Subject: Re: F/UP TMFPMarti, IRA Excess Contrib Date: 3/3/2008 5:49 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
I'm curious as to why you suggest using the Code1 for IRA distribution. Since all I have is Roth IRAs and if this is not going to show to the IRS.

Because I knew it would generate the penalty on the positive earnings and I didn't know what the code for a corrective distribution of an excess Roth distribution before the due date was. If you want to look it up, check Form 1099-R.

When all of this is said and done for 2007, what happens when Fidelity sends me a 1099-R in 2008 next year.

It should be coded as a timely distribution of a 2007 excess contribution taxable in 2007.

Phil

Print the post Back To Top
Author: TerryMcK Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 99196 of 121223
Subject: Re: F/UP TMFPMarti, IRA Excess Contrib Date: 3/3/2008 8:26 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Thanks for your help Phil.

Terry

Print the post Back To Top
Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 99202 of 121223
Subject: Re: F/UP TMFPMarti, IRA Excess Contrib Date: 3/4/2008 7:29 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
If you haven't already finished your return, I happened to be looking at the 1099-R Box 7 codes and see that the "correct" code is "8." (The end result will be the same.) The 2008 1099-R you receive should be coded "P."

Phil

Print the post Back To Top
Author: TerryMcK Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 99900 of 121223
Subject: Re: F/UP TMFPMarti, IRA Excess Contrib Date: 3/30/2008 11:13 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I made the withdrawal from both Roth IRAs at Fidelity. There was a $5K deposit in each in 2007. The result was a distribution of $4885 from one (loss) and $5443 from the other (gain).

So now we're ready for TurboTax. Create 2 1099-R's.

#1: Box 1 $5443, Box 2 $443, Box 7 1, and check the IRA box.

#2: Box 1 $4885, Box 2 $0, Box 7 1, and check the IRA box.

This should give you $443 on line 15b and $44 on line 60 of the 1040.

Phil


Phil,
I finally got all my data to file, and.
I did all of the above with the following changes. Box 7, I selected "8" vs "1" and I did check the IRA box.

This resulted in the $10,329 in 15a, $443 in 15b, but nothing on line 60.

Also, the fairmark folks suggested to everyone with a similar situation to add an explanatory note, so the IRS will be happy when this is reported for 2008. I added the explanation at line 15b where there is box to select an explanation, but I don't see where this shows up in the forms to the IRS.

Print the post Back To Top
Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 99902 of 121223
Subject: Re: F/UP TMFPMarti, IRA Excess Contrib Date: 3/31/2008 7:16 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
#1: Box 1 $5443, Box 2 $443, Box 7 1, and check the IRA box.

#2: Box 1 $4885, Box 2 $0, Box 7 1, and check the IRA box.

This should give you $443 on line 15b and $44 on line 60 of the 1040.


I finally got all my data to file, and.
I did all of the above with the following changes. Box 7, I selected "8" vs "1" and I did check the IRA box.

This resulted in the $10,329 in 15a, $443 in 15b, but nothing on line 60.


Well, first the good news. Your return is showing the correct numbers on lines 15a and 15b, assuming there's a typo by one of us in your numbers regarding 15a. (According to what's shown above, 15a should be $10,328.) I've gone back and re-read the thread, and it's up in the air as to whether there should be a penalty. It slipped right past me earlier that at least one of you was over 59 1/2 at the time of the distributions.

Regardless of what the software is doing, if the person with the positive earnings was under 59 1/2 at the time of the distribution, you owe the 10% penalty on the earnings.

Software complicates, rather than simplifies this process. I input two 1099-R's with code 1 and two with code 8, both spouses under 59 1/2. Code 1 correctly produces the penalty; code 8 doesn't. I have no idea why.

What we need to know is whether in your specific case the penalty applies.

Also, the fairmark folks suggested to everyone with a similar situation to add an explanatory note, so the IRS will be happy when this is reported for 2008. I added the explanation at line 15b where there is box to select an explanation, but I don't see where this shows up in the forms to the IRS.

Actually, it has nothing to do with your 2008 return. The 2007 instructions tell you to attach an explanation of the numbers on line 15. When you print out a final version of your return we'll see whether the software has produced the statement because you checked that box, which isn't on the actual 1040.

Phil

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: TerryMcK Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 99913 of 121223
Subject: Re: F/UP TMFPMarti, IRA Excess Contrib Date: 3/31/2008 6:19 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Well, first the good news. Your return is showing the correct numbers on lines 15a and 15b.

I've gone back and re-read the thread, and it's up in the air as to whether there should be a penalty.

Software complicates, rather than simplifies this process. I input two 1099-R's with code 1 and two with code 8, both spouses under 59 1/2. Code 1 correctly produces the penalty; code 8 doesn't. I have no idea why. What we need to know is whether in your specific case the penalty applies.

Actually, it has nothing to do with your 2008 return. The 2007 instructions tell you to attach an explanation of the numbers on line 15. When you print out a final version of your return we'll see whether the software has produced the statement because you checked that box, which isn't on the actual 1040


Getting this bear narrowed down...

First, we are both over 59 1/2 and I assume no penalty. I guess this with the code 8, results in no entry for line 60 of the 1040.

Finally, the explanatory note. First, I went to the "explain" screen and entered an explanation of the excess contribution and withdrawal> Tehn when I ran my review, I had 2 errors. TT wanted me to provide an explanation for each of the IRAs on a form 8606. So I repeated the explanations with the separate earnings/loss detailed. When I printed my return, I had a single page with 3 explanatory notes. The one I entered at line 15 and the 2 8606s. BTW, these are all just listed in paragraph form with references to form & line number (no indications that there is an 8606).

Hopefully, I can just delete the one at line 15, stay with the 2 from 8606, and be done !!!

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 99914 of 121223
Subject: Re: F/UP TMFPMarti, IRA Excess Contrib Date: 3/31/2008 6:41 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
First, we are both over 59 1/2 and I assume no penalty. I guess this with the code 8, results in no entry for line 60 of the 1040.

If you feel like playing with it, you should get the same result with code 1. The key is that you're both over 59 1/2, so no early distribution penalty no matter what the reason for the distribution.

Finally, the explanatory note. First, I went to the "explain" screen and entered an explanation of the excess contribution and withdrawal> Tehn when I ran my review, I had 2 errors. TT wanted me to provide an explanation for each of the IRAs on a form 8606. So I repeated the explanations with the separate earnings/loss detailed. When I printed my return, I had a single page with 3 explanatory notes. The one I entered at line 15 and the 2 8606s. BTW, these are all just listed in paragraph form with references to form & line number (no indications that there is an 8606).

Hopefully, I can just delete the one at line 15, stay with the 2 from 8606, and be done !!!


Software strikes again. If you look at the low-tech instructions for Form 8606, it specifically tells you not to file an 8606. You're supposed to just attach an explanation keyed to line 15 of the 1040. Why TT wants you to explain entries on a form you're not filing is beyond me.

Were I you, I'd call it a wrap as it is.

Phil

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: TerryMcK Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 99926 of 121223
Subject: Re: F/UP TMFPMarti, IRA Excess Contrib Date: 4/1/2008 12:44 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Thanks for all of your help Phil.

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (14) | Ignore Thread Prev Thread | Next Thread
Advertisement