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I now have a Roth IRA with $2000 from 1998, $2000 from 1999, plus interest earned from April until today.

Now the problem. My 1999 AGI is above the cap, so my 1999 Roth contribution is disallowed. How do I undo my 1999 contribution and what (if any) penalties will I owe?

Any help appreciated. My accountant doesn't know the exact procedure and I want to act before 12/31/99.

I have the same "problem". You might want to look at . Your IRA custodian (and your accountant) should know how to handle this... however, I work with Fidelity and had to make several calls before they got it right.

I think you will need to remove half of your Roth account. You can recharacterize it to a traditional IRA account without tax or penalty, or withdraw it and pay tax and 10% early distribution penalty on the earnings (i.e. the amount you remove that's over $2000).

If you do nothing, the penalty is 6% of the disallowed contribution, per year. (And probably, the same tax and penalty mentioned above will still apply when you finally fix the problem.)
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