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Made excess ROTH contribution...Please help

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What is the name of your state? NJ

My girlfriend and I both funded our Roth IRAs January 2006. We got married in February 2006. I have found that there is such a thing as the "marriage penalty"! If we were still single, our contributions would be good. Since we got married, we have found that our income for 2006 is "over the limit" to contribute for 2006. We have halted further contributions and did not make a 2007 contribution.

What is the likelihood that if we don't withdraw the 2006 contribution and earnings on such that IRS will catch it? It would be a bit of a hassle to withdraw, as we made many small stock purchases that would be subject to numerous commissions on the sales. Also, if the likelihood is rather high that it gets noticed, must the situation be rectified by Oct. 15 to avoid the excise tax (we filed an extension)? Thanks for any advice!What is the name of your state?What is the name of your state?
 


abezon

Senior Member
The penalty for overcontributing is only 6%. It might be cheaper to just pay the overcontribution penalty than the sales commissions. The overcontribution is penalized every year until you have Roth contribution room again or withdraw the contribution & earnings.

Any chance you're buying a house & qualify as a first time home buyer? You might be able to simply withdraw some money from the Roth for a downpayment & fix things that way.
 
Thanks for the good advice, but no. I have been told that I can reclassify the contribution as "traditional IRA", and supposedly my broker can help. Supposedly this gets me off the hook. I'll call him to find out more...
 

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