Author Topic: Withdrawing over contribution to ROTH IRA  (Read 2710 times)

Skinnyneo

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Withdrawing over contribution to ROTH IRA
« on: January 21, 2013, 11:46:03 PM »
I live over seas and my income is below the foreign earned income exclusion of $95,000 meaning I don't have to claim my income when doing my taxes.  However I foolishly contributed almost $4500 to a ROTH IRA that I started last summer.  I later found out you can't contribute more to a ROTH than your adjusted gross income.  Beings I have very little income (some low interest savings and checking accounts) in the USA I'm way over my limit.

I was told that I can avoid paying any fees or penalties if I withdraw the money before April 15th when taxes are due.  Can I just simply sell the ROTH IRA funds and move them to a non tax sheltered account (I'm with Vanguard) or do I need to do something special so the IRS knows this with an over contribution withdraw? 

Thanks!

Hamster

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Re: Withdrawing over contribution to ROTH IRA
« Reply #1 on: January 22, 2013, 02:25:31 AM »
Call vanguard and they can walk you through it. I had to do something similar a few years ago. Vanguard gave me all the documents to figure the taxes on the earnings from my Roth contributions.

arebelspy

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Re: Withdrawing over contribution to ROTH IRA
« Reply #2 on: January 22, 2013, 07:50:20 AM »
There's a one page (usually) withdrawal document where you check the reason. Over contribution is one.  Hamster is right, call or email customer support and they'll help you out.
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Skinnyneo

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Re: Withdrawing over contribution to ROTH IRA
« Reply #3 on: January 22, 2013, 02:20:44 PM »
Thank you!

So I called and they were very helpful!  I'm still pretty new at this so I just wanted to confirm what I was told on the phone.  I invested about $4500 of my own money but there were gains of about $100 when I called and told them to withdraw it as an over contribution.  He said that there would be a 10% penalty for early withdraw but that is just on the gains correct?

arebelspy

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Re: Withdrawing over contribution to ROTH IRA
« Reply #4 on: January 22, 2013, 03:35:10 PM »
Yes, legally it should be, but double check with them on how they're reporting it to the IRS.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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