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haiwen68
Level 1

I opened a Roth IRA account in October 2018, and deposit $6500, if I take out the money and close the account before April 15, 2019, will I get any penalty?

 
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LinaJ2018
Intuit Alumni

I opened a Roth IRA account in October 2018, and deposit $6500, if I take out the money and close the account before April 15, 2019, will I get any penalty?

No, very likely you will not be penalized by taking out your contribution.  Per IRS, you can always withdraw the amount of how much you contribute without any penalty and tax anytime in the year.  Since you are ineligible for the contribution at the first place, IRS will start imposing interest once the contribution was made and you might need to pay some taxes if there is any.   

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7 Replies
LinaJ2018
Intuit Alumni

I opened a Roth IRA account in October 2018, and deposit $6500, if I take out the money and close the account before April 15, 2019, will I get any penalty?

Are you age of 50 or older?
haiwen68
Level 1

I opened a Roth IRA account in October 2018, and deposit $6500, if I take out the money and close the account before April 15, 2019, will I get any penalty?

yes.
haiwen68
Level 1

I opened a Roth IRA account in October 2018, and deposit $6500, if I take out the money and close the account before April 15, 2019, will I get any penalty?

yes. I am married filing separately, My MAGI of $44,847 exceeds $10,000 and I am not permitted to make a Roth IRA contribution. The banker told me that Roth IRA account cannot change or transfer to the traditional IRA account. how should I do?
haiwen68
Level 1

I opened a Roth IRA account in October 2018, and deposit $6500, if I take out the money and close the account before April 15, 2019, will I get any penalty?

If I close the account before April 15, 2019, I do not report the  Roth IRA on 2018 tax return, will I get any penalty?
LinaJ2018
Intuit Alumni

I opened a Roth IRA account in October 2018, and deposit $6500, if I take out the money and close the account before April 15, 2019, will I get any penalty?

Please answer below.
LinaJ2018
Intuit Alumni

I opened a Roth IRA account in October 2018, and deposit $6500, if I take out the money and close the account before April 15, 2019, will I get any penalty?

No, very likely you will not be penalized by taking out your contribution.  Per IRS, you can always withdraw the amount of how much you contribute without any penalty and tax anytime in the year.  Since you are ineligible for the contribution at the first place, IRS will start imposing interest once the contribution was made and you might need to pay some taxes if there is any.   

dmertz
Level 15

I opened a Roth IRA account in October 2018, and deposit $6500, if I take out the money and close the account before April 15, 2019, will I get any penalty?

Unless you were age 70½ or older in 2018, the IRA custodian was incorrect in telling you that the contribution cannot be moved to a traditional IRA.  Moving the money to a traditional IRA to make the original contribution be a traditional IRA contribution instead of a Roth IRA contribution is called a 'recharacterization.'  When the custodian performs a recharacterization, the amount moved to the traditional IRA is the amount of the original contribution to the Roth IRA adjusted for any gain or loss while in the Roth IRA.  Recharacterizing the entire $6,500 contribution will result in your tax return showing a deduction for $6,500 traditional IRA contribution on Schedule 1, or, if you chose to make the contribution nondeductible, a nondeductible traditional IRA contribution on Form 8606.

To avoid having to report an excess contribution and pay an excess contribution, you must either do the recharacterization described above or obtain a "return of excess contribution," not a regular distribution.  A regular Roth IRA distribution will NOT eliminate the excess contribution penalty for 2018.  If you choose not to do a recharacterization, when you ask the Roth IRA custodian to make a return of excess contribution, the custodian will distribute to you the adjusted amount calculated in the same manner as for a recharacterization.  If the return of contribution distribution is greater than $6,500 due to investment gains, the gains will be taxable income and, if you are under ate 59½ at the time of this distribution, the gains will also be subject to an early-distribution penalty.

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