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Old 03-31-2015, 06:40 PM
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IRA distribution taxable or not

I'm not sure of the first time I posted this Q went through the system. here goes again

On March 31st 2014 I made a contribution to the Traditional IRA to be accounted for fiscal year 2013. A few days later I realized I do not get the tax free deposit because I was exceeding the income bracket for it. On April 14th 2014 I moved the funds to the Roth IRA to also realize I do not get tax benefits from that account either. Those fund are accounted as contributions to the Rothe IRA in 2014.Given that I did not get any tax breaks on April 15th 2014 I withdraw the money from the account.
Now I received two 1099-R forms. On the transfer from Traditional to Roth IRA I got the full amount as taxable. On the withdrawal from the Roth IRA I got no taxable amount. My question are
1 Should I pay taxes on the taxable amount? I hope not since I already did and got no benefits from it
2 What forms should I fill or what advice I can get to proceed?
Regards,



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Old 03-31-2015, 11:01 PM
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On March 31st 2014 I made a contribution to the Traditional IRA to be accounted for fiscal year 2013. A few days later I realized I do not get the tax free deposit because I was exceeding the income bracket for it. On April 14th 2014 I moved the funds to the Roth IRA to also realize I do not get tax benefits from that account either. ==========>>you can not get tax befits, deduction on your r-ira contribution as all contributions are made to Roth IRAs on an after-tax basis. You fund a R-IRA with after-tax money, meaning that you take no tax deduction for your R-contributions. As such, withdrawals of contributions made to an IRA are not subject to taxes or any tax penalty.


Those fund are accounted as contributions to the Rothe IRA in 2014.Given that I did not get any tax breaks on April 15th 2014 I withdraw the money from the account.
Now I received two 1099-R forms. On the transfer from Traditional to Roth IRA I got the full amount as taxable. On the withdrawal from the Roth IRA I got no taxable amount. My question are; 1 Should I pay taxes on the taxable amount? I hope not since I already did and got no benefits from it======>>>I guess it depends; a penalty tax will apply if you don't take action to correct an excess contribution. There are various ways you could find yourself with an excess annual contribution to a Roth IRA; one example is Your permitted Roth contribution was reduced or eliminated because of the size of your magi.say, if you made non-deductible traditional IRA contributions, any amount that you withdraw that is not attributable to the non-deductible contribution such as the earnings is a non-qualified withdrawal and it's subject to penalties.so aslongas you find that your contribution to a Roth IRA was improper or too large, you can avoid the 6% penalty tax by taking the money out. Relief from the penalty is available only if You receive a distribution from the IRA on or before the due date including extensions for filing your 2014 return.The distribution includes the amount of the excess contribution and the amount of net income attributable to the contribution. If you don't take a corrective distribution for the year of the original contribution as indicated above, you can take a corrective distribution for a later year to avoid yet another 6% penalty. In this case You don't have to withdraw earnings at this point, just the original amount of the excess. But you also don't get to take the corrective distribution after the end of the year. For example, if you made an excess contribution for 2014, the deadline for avoiding the penalty on your 2004 return is October 15, 2015, and the deadline for avoiding the penalty on your 2015 return is just 11 weeks later, December 31, 2015
2 What forms should I fill or what advice I can get to proceed? ======>>> When you choose this method of correction, you're required to report and pay tax on the net income attributable to the contribution in the year of the contribution, even if you take it out during the following year, before the return due date. The earnings will be taxed like any other taxable distribution of earnings from a Roth IRA, and will be subject to the early distribution penalty if you're under 59½ unless an exception applies. This method of correction gets you out of the penalty and works for any situation where an annual contribution results in an excess contribution.



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Old 04-01-2015, 12:16 AM
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Thanks Wnhough. I'll read it carefully and get back if additional Qs



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