Problem getting IRA custodian's help on calculating excess contribution earnings

Forum|Forum|6 years ago
February 19, 2020
1 reply
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Dear experts,

I understand when a Roth IRA has excess contribution the contribution and its earnings have to be removed. I was advised to not do it myself and ask the IRA custodian to do it. I reached out to the IRA custodian, my ex financial advisor, and asked her to do the calculation. It didn't really work out and I am looking for an alternative. Could someone make a suggestion?

Thanks,
Vicky

macuser_22

Alumni - Champ

You don't go to your financial advisor, you go to the account trustee at the financial institution that holds the IRA. Only the account trustee can preform a "return of contributions" and send you a proper 1099-R with the correct box 7 code of a return of contribution (code 8 or P) with the returned amount in box 1 and the earnings reported in box 2a.

You cannot preform a "return of contributions" yourself. Removing the excess yourself would probably be a taxable distribution and not a return of excess contributions.

The return of contribution (and earnings) must be completed by the due date of the tax return for the year that the contribution was for or the extended due date if a timely extension is filed.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

tdo061803Author

Level 4

Hi Macuser_22

Thank you so much for your answer. Who would be the account trustee? I have the Roth IRA account at Ameriprise.

"You cannot preform a "return of contributions" yourself." by that you probably mean I shouldn't just transfer money out in order to remove the excess right? I am going to file an Excess Removal Form.

pp15

Level 2

@pp15 wrote:

I really appreciate your inputs.. Once I receive 1099-R then file amendment for 2020 taxes?

since earnings withdrawn in 2021, I thought I need to include these earnings in 2021 taxes (1040 form) and was under impression that no need to file amendment for 2020 taxes.

If this was a 2020 excess then the earning can only be reported in the tax year the contribution was for, not the year withdrawn.

Thank you Champ.. Appreciate it!

Is there any specific order? Once I receive 1099-R.. file 2020 amendment and wait for it to be processed by IRS and then file 2021 taxes?

or can I file 2020 amendment and 2021 taxes together?