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Subject:  Reporting earnings on excess Roth contributions Date:  3/24/2014  7:25 PM
Author:  pretender76TX Number:  120565 of 132196


While preparing 2013 Tax Return I have discovered that I was not allowed to contribute to my Roth IRA in 2011 due to the AGI limitations. I did contribute $5,000 in 2011.

I understand that I have to file amended 2011 and 2012 returns both having form 5329 added and pay 6% excise tax on the excess amount (=5,000) for both years. I will also file 5329 for 2013, but since I caught it before April 15, 2014 it will be on the original return.

I am also planning to remove both principal (=5,000) and earnings in order to correct the excess contribution and avoid paying 6% excise tax in subsequent years. My broker (E-Trade) will not calculate earnings on contributions made during years prior to 2013, so I will have to do it myself -- I did find the IRS Worksheet in Pub 590 to calculate the earnings -- and I will do so.

Everything that I have read so far says that I need to report the earnings portion of the return as regular income as well as calculate 10% early withdrawal penalty on it (since I am younger than 59 and 1/2) for the year the excess contribution was made, NOT for the year it was removed.

My question is to confirm the above: If I make the withdrawal from my Roth IRA of 2011 excess contribution (both principal and earnings) in March 2014, do I report the earnings as regular income and calculate 10% penalty on the earnings amount on form 5329 on my amended 2011 return?

Thank you in advance,

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