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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 76418  
Subject: Re: Re-Contributing Date: 2/2/2001 10:41 AM
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Greetings, LTDEBT, and welcome. You asked:

Say in March I put $2000 in my Roth, in May I remove $2000 for "personal reasons," and then I decided I want to put the money back in, so I contribute $2000 in October. Ultimately I still have $2000 in the account, but haven't I contributed $4000 for the year? I understand that I would get a 1099R stating I removed the $2000, thus crossing out $2000 on my 5498.

My understanding is that if the original $2000 was removed with earning (NIA), then I am allowed to put the money back into the IRA. What happens if earnings weren't taken out on the original distribution? Is that second $2000 an excess contribution? Where can I find this in IRS Regs (I have looked in 590 but haven't come up with anything).


I'll leave the "why" of why you would wish to do that to you. Just be aware that if you remove the $2K but not then earnings, then all you have is an ordinary distribution of your original contribution. You cannot redeposit that sum UNLESS you do so within 60 days of taking it. If you do redeposit it in the same year, then you will have made an excess contribution of $2K. That will be penalized 6% per year each and every year until it is removed (or at least attributed to another and future year's contribution).

Other than the $2K distribution doesn't meet the criteria for a complete withdrawal of the original contribution (it must include all earnings to do so), I don't think you will find anything specific in Pub 590 on the issue.

Regards..Pixy
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