Earlier this year I contributed the maximum $8000 to a Traditional IRA for this tax year. This was intended as a non-deductible IRA contribution. I have had many years of non-deductible IRA contributions so I have filed form 8606 to track my basis. Unfortunately, my circumstances have changed and I need to turn around and do a withdrawal for tens of thousands of dollars this year. I am in my 60's. I realize I will have to pay tax on the withdrawal (less the basis calculation from 8606) but do I have to worry about anything else like a penalty or withdrawing earnings on this year's contributions?
No penalty, only tax at your marginal tax rate for pre tax contributions as you acknowledged.
you should first ask for a return of contribution ($8,000) so you will get that entire amount back.
I guess I don't understand the advantage of doing it that way. If I contributed $8,000 but I'm going to withdraw $30,000 why break it up into pieces?
I think the idea is that you can withdraw the $8,000 non deductible contribution without paying tax or penalty.
Read page 30 correcting for year 2024.
https://www.irs.gov/pub/irs-pdf/p590a.pdf
Interesting. I'll look into that. Not sure what happens to the earnings on that $8000 though.
You will also need to withdraw any earnings the money made while it was in the IRA. These earnings must be reported as ordinary income.
I started the process today. I was originally going to do the $8000 as a mostly taxable withdrawal but asking for a return of the 2024 contribution tax-free(and getting taxed on the small amount of earnings from it) is definitely the way to go for me. THANKS!!!