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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75642  
Subject: Re: Roth IRA Clarification Date: 12/26/2000 3:36 PM
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Greetings, kschlimm, and welcome. You asked:

My boyfriend contributed to his Roth IRA in January, but he had a very good year in sales, which has pushed him over the salary limit. What should he do with the Roth (which was funded for 1999 and 2000)? Does he transfer it to a traditional IRA? And when does he need to do this by?

If his adjusted gross income was $95K or less for 1999, then he must do nothing with that $2K contribution. Otherwise, he would be required to take that contribution plus any earnings associated with it out of the IRA. For the 2000 $2K contribution, he may do one of two things, both of which are described in IRS Publication 590 (Individual Retirement Arrangements, and that's available for download at http://www.irs.ustreas.gov/forms_pubs/pubs.html.

He may withdraw the $2K and any of its associated earnings no later than April 16,2001 (tax filing day without extensions). In doing so, he must declare any earnings as income and pay the 10% early withdrawal penalty (assuming he's younger than age 59 1/2).

Alternatively, he may have the $2K 2000 contribution and its earnings transferred to a traditional IRA as if the $2K had been there all along. That's called a recharacterization, and he has until October 15, 2001, to get that action accomplished. His IRA provider can walk him through the steps to recharacterize his contribution.

Regards..Pixy
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