How to Handle Excess Contributions to Retirement Plans
Do you have an IRA or a Roth IRA or a Qualified Pension Plan and contributed too much to it?
For an IRA or Roth IRA, this could occur if:
o You have earned income less than the amount contributed OR
o You contributed more than the maximum allowed for the year ($4,000 for 2007 ($5,000 maximum if you are age 50 or older) OR
o You have the contribution limited by your federal adjusted gross income.
For a Qualified Plan, this could occur if:
o You have more than one 401(k) plan OR
o Fall into the highly compensated individual rules
So you know that you’ve over contributed and you’ve taken the money back out of the retirement plan.
How do you handle it on your tax return? Well, it depends!
Did you take out the money before or after your tax return due date? For your contribution for 2007, did you take it out in 2007 or 2008? What does the 1099-R(s) that you received look like? How do you enter the 1099-R in the TurboTax Interview?