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Greetings, Goldstucker, and welcome. You asked:

<<On a Roth, if you have contributed during the year and find at the end that you exceed the AGI rule (either partial or 100%), I know, of course, you pay taxes on the contribution - thats a ROTH. I also figure you'll have to pay taxes on the interest earned in the year you exceeded AGI (another question, another time) BUT do you have to take the money out or can you leave it in?>>

If you exceed the AGI limit for the Roth contribution you must take that money and its earnings out of the Roth no later than the due date of your income tax return for that year. That's usually April 15, but next year it will be April 17 because the 15th falls on a weekend day. If you fail to do so, then you will be penalized 6% on the excess contribution for the year, and that penalty will continue each and every year until the excess is removed.

The IRS says, though, that you may recharacterize that contribution as one made to a nondeductible traditional IRA prior to April 15 (or 17 for next year), and all will be well with the world. So, if you're in that situation, simply notify your IRA custodian and tell that agency you wish to have the contribution recharacterized as one made to a a regular, traditional IRA instead of to a Roth. That contribution and its applicable earnings will then be moved to a traditional IRA.

<<I'm assuming the AGI rule applies yearly. Also realize in this case we are not qualified to participate in a traditional IRA.>>

Yes, the AGI limit is a yearly one, but even if you exceed it you still always have the option of using a nondeductible traditional IRA so long as you have the earned income to do so and are under the age of 70 1/2.

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