I have been told by the broker that they do not calculate the earnings and I should ask a tax advisor. Are the earnings simply the fair market value of the account on the day the excess contribution was deposited minus the fair market value of the account the day the excess was withdrawn?
According to the IRS publication 590 - www.irs.gov/pub/irs-pdf/p590.pdf - In most cases, the net income you must withdraw is determined by the IRA trustee or custodian.
I never saw the broker who refused to help with such determination - that might be the time to move your assets to a different broker.
If you need to determine the applicable net income on IRA contributions use Worksheet 1-4. Determining the Amount of Net Income Due To an IRA Contribution and Total Amount To Be Withdrawn From the IRA (that is from IRS publication 590)
|1.||Enter the amount of your IRA contribution for 2010 to be returned to you||1.|
|2.||Enter the fair market value of the IRA immediately prior to the removal of the contribution, plus the amount of any distributions, transfers, and recharacterization made while the contribution was in the IRA ||2.|
|3.||Enter the fair market value of the IRA immediately before the contribution was made, plus the amount of such contribution and any other contributions, transfers, and recharacterization made while the contribution was in the IRA ||3.|
|4.||Subtract line 3 from line 2||4.|
|5.||Divide line 4 by line 3. Enter the result as a decimal (rounded to at least three places)||5.|
|6. ||Multiply line 1 by line 5. This is the net income attributable to the contribution to be returned||6.|
|7.||Add lines 1 and 6. This is the amount of the IRA contribution plus the net income attributable to it to be returned to you||7.|
Also, see the following:
"A return of excess contributions is not required if you are correcting the excess contributions to subsequent years"
Why can't I correct the excess of 2010 to 2011 by notifying the broker it is to be redirected to 2011 before the 2011 filing deadline and then because it is considered excess in 2011 also, then request a withdrawal before the 2011 filing deadline?
That could be done if the contribution for 2010 was made between Jan 1 2011 and Apr 15 2011 - in this case your contribution might be recharacterized. Because your contribution was made before Jan 1, 2011 - it may not be treated as for 2011. It technically must be distributed first.