topic When I filed my tax return for 2016, I said I would contribute $6,500 to IRA for spouse, and got a larger refund on that basis. in Retirement tax questions

When I filed my tax return for 2016, I said I would contribute $6,500 to IRA for spouse, and got a larger refund on that basis.

jimmy-p-isaac — Mon, 03 Jun 2019 18:37:04 GMT

But now on checking my investment accounts, I found I have already contributed $6,500 to Roth IRA for 2016.

Do I need to amend my tax return? Can I move the $6,500 from the Roth IRA to IRA for spouse, and then my tax return is still valid - but I think there is a penalty for taking distributions from Roth IRA before 5 years.

You have a few options- Briefly stated: -Amend your retur...

ChristinaS — Mon, 03 Jun 2019 18:37:05 GMT

You have a few options- Briefly stated:

-Amend your return to remove the IRA deduction. Don't both doing anything on the investment level

-Recharacterize the Roth contribution to a Traditional IRA. You will need the custodian to report the earnings on the rechacterization and you will need to amend your return to create a statement, but you won't owe tax. If you recharacterize the contribution to a Traditional IRA, you are moving the money into a taxable account. These earnings would be taxed when she withdraws money.

-Withdraw the Roth contribution, with earnings. Pay a tax (and likely a 10% penalty) on any growth. So, if you contributed $6500 and its now $6800, you have $300 in taxable income. The tax impact here really depends on the earnings.

All of these considerations have their own nuances (like anything else in taxes), but this is it in a nutshell.

Thank you, your answer is helpful!

jimmy-p-isaac — Mon, 03 Jun 2019 18:37:06 GMT

Thank you, your answer is helpful!

Why, thank you! And you're welcome:-)

ChristinaS — Mon, 03 Jun 2019 18:37:07 GMT

Why, thank you! And you're welcome:-)