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Thank you so much for explaining what to expect.

Follow up question to your reply -

Not quite. The IRA custodian will give you the full amount of your excess contribution and earnings - $2400 in your example. You need to include the $400 of earnings on your 2006 tax return. The tax and penalty will be calculated and submitted with your 2006 tax return.

How do I report the $400 in earnings? Do I report it as a capital gain (ie treat like I received 1099-div or a 1099-b)Or do I report it as a income and enter it as a 1099-R

Also am aware of the option to recharacterize to trad IRA but what I have is a rollover IRA and keeping track of it will be a bit much I think.


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