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Greetings, Nick, and welcome. You asked:

<<I haven't seen this on the board recently, so I thought I'd ask it here....

I'm single, and opened up a Roth IRA, and I'm planning to put $4000 into it ($2000 for '98 & $2000 for '99) about Jan 2nd. I know for a fact I'm making below the threshold for this year, but what happens if I contribute $2000 on Jan 2nd next year and I end up making more than the threshold? What are the penalties? Do I have to give any made (lost?) money back?>>

If as a single filer your AGI exceeds $90K, then the Roth IRA contribution gets scaled back. At $110K, it's disallowed. At that point, you have until 4/15 of the following year to recharacterize the contribution as one made to a nondeductible traditional IRA. Alternatively, you can withdraw all the money to include the earnings as an excess contribution. You'll be taxed and penalized on the earnings if you go that route. As a last option, you can leave that year's contribution in the Roth; but if you do, you will be penalized 6% on the contribution each and every year until it's withdrawn.


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