If you just withdraw the money from the Roth IRA, your earnings will be taxable on your 2016 return, even if you’re pulling the money this calendar year, explained Steffen at Robert W. Baird. This signifies that if you have filed early, and you just take out the excessive contribution afterward, you may perhaps have to file an amended return to account for these earnings.
You’ll also be issue to the 10 p.c early withdrawal penalty if you’re underneath age 59½.
An choice would be to recharacterize the excessive contribution and earnings so that it really is a traditional IRA contribution.
“If you assumed you would qualify for a Roth contribution and you didn’t, you likely will not qualify for a traditional deductible IRA contribution,” Steffen explained.
In this case, you can expect to have till Oct. 15 to recharacterize money you contributed final calendar year. To simplify the approach, be guaranteed to speak to the business that is holding your Roth IRA and ask for the recharacterization.
“Recharacterization is the final resort if your filing deadline has arrive and gone, and you have produced an excessive contribution,” Steffen explained. “You can steer clear of the penalty, but the money has to go to a distinctive IRA.”