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I contributed the full $5,500 to my Roth IRA this year only to just realize that I am completely ineligible for it and therefore I now have an excess contribution of $5,500. The perils of being a newlywed... Anyway, now I am trying to figure out how to remedy it. Two options:

1) Withdraw it all. Pay 10% distribution penalty (but what is the 10% assessed on?). and pay 33% taxes on the net income attributable. In rough numbers my NIA is 5500 x ((60000-40000)/40000) = 2750. So "loss" = $900 + penalty. Note I live in FL but spent the first 8 months of 2013 in NY, so maybe state tax comes into play too?

2) Keep it there and don't contribute anything more this year (I have already contributed $750) I would pay 6% excise tax but only on the excess contribution. So $330 for 2013 excess and $45 for 2014 excess. Note that this is an option because my husband made a career switch and took a significant pay cut so I anticipate full eligibility again in 2014.

By my logic option #2 is the obvious way to go. But I want to make sure that all my assumptions are correct. Mainly I want to make sure the 6% excise tax does not apply to NIA. Please help! Thank you in advance!
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