A 60-second read by Victor Cannillo:
#1 – We highly recommend you hire a Certified Public Accountant to help you resolve the issue.
Here are some points to consider:
- There are limitations on the total amount that may be contributed to an IRA. Currently, it’s the greater of either $5,500 ($6,500 if the person is 50 or older) or your taxable compensation for the year.
- The IRS considers each individual person to have a single IRA. The maximum contribution limits apply to all of your IRA accounts. If you have more than one IRA account open, you can contribute to one account or all of your accounts as long as the total contributions meet the yearly limit.
- If there are excess contributions to your IRAs, there is an annual additional 6% tax penalty (paid with the filing of Form 5329) on those excess contributions until you withdraw them from your account.
- Normally, if the excess contribution for the tax year is withdrawn with any related earnings before the tax return deadline (including extensions), you are not subject to the 6% additional tax. Also the earnings on the excess IRA contributions as determined by the custodian will be subject to tax for the year the excess contribution was made. Those earnings are also subject to a 10% early withdrawal penalty if the person’s age is under 59 and a half for the year of the contribution.
- You will need to consult a Certified Public Accountant to determine what tax returns need to be filed.
If you have more specific questions on this matter, we recommend speaking with a tax professional.
For any other questions, please reach out to your Baron Team.