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A work colleague mentioned today that he will be making a contribution to his Roth IRA soon for 2012. As I'm aware his 2012 income exceeds the maximum income limit, (single, well over $125k) I asked why/how he was going to do this?

He replied he was not aware of the income limits and had openened the Roth account 6 years back and had made contributions each year. We discussed his income over the past six years and in the year he opened the account he was eligible, but 4 of the following 5 years his income exceeded the amount where a Roth IRA contribution was permissable.

Is there any check or balance within the IRS to notice? Any possible penalty in the future? His stance was that even though he now knows it's not permissable, since he is not taking a deduction against current income and he hasn't received any notice not to do this, he will continue to fund his Roth each year as a retirement vehicle.

Not judging, but I don't think this is a good strategy for him and would like to provide additional information on risks he may be taking. He's young, early 30's, and thinks when goes to take this money out in 30+ years, no one will notice. The gains in the account over the years are minimal, maybe $2,500., which would allow him to "get legit" without too much of a penalty. Anybody have ideas on how he is able to do this without notice and what risks / penalities he may be incurring?
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