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@fanfare wrote:
OK I'll take your word for it.
Separately
"but did remove the excess as required to stop the 2019 6% penalty, therefore, since the penalty was paid, any earnings can remain in the IRA."
There was a big discussion on this point a few years ago. As I recall
the upshot was the earnings *cannot* remain in the IRA (it was Roth not Traditional if that makes any difference),
I'm glad to hear now that I must be mis-remembering the conclusions reached in that thread (which has been deleted).
The IRS says:
You won’t have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw any interest or other income earned on the excess contribution. You must complete your withdrawal by the date your tax return for that year is due, including extensions.
If the "and you also withdraw any interest or other income earned on the excess contribution." condition is not met then the 6% penalty applies to that tax year. To avoid future 6% penalty the contribution must still be removed.
The only difference in removing it with the earnings (as a return of contribution) or as a normal distribution is whether only the earnings are taxed, or the entire excess amount is taxed at 6% (actually an excise tax).
Ow, wow. Thanks for the input, I'm finally wrapping my brain around this. I took out more than enough in a distribution, and I paid a 6% penalty (a whopping $52) on my 2018 return, so I'm covered both ways. Overkill, maybe, but at least it's resolved. I'll just zero out the $864 excess on my 2019 return and call it a day. Thank you all!
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