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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29571
Experience:  Taxes, Immigration, Labor Relations
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I purchased a IRA in Dec. and my only income is from a retirement

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I purchased a IRA in Dec. and my only income is from a retirement annuity, I found out while i was doing my taxes that I can not do a IRA without income. I went to my bank and closed the IRA. Now do I have to claim anything with that, if so is there a penalty?

In general, if the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax.

You will not have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw any interest or other income earned on the excess contribution. You must complete your withdrawal by the date your tax return for that year is due, including extensions.

However - earnings will be taxable.

The administrator of your IRA account should issue the reporting form 1099-R - www.irs.gov/pub/irs-pdf/f1099r.pdf

Be sure that the distribution code in the box 7 is 8-Excess contributions plus earnings

 

Let me know if you need any help.

 

Customer: replied 7 years ago.
Do I need to get a 1099-R from my bank before I file

No - if you withdraw an excess contribution in 2010 - the form will be issue in 2011,

just be sure to inform your bank that this is an excess contribution and should be reported properly.

 

Earnings - if any - will be taxable on your 2010 tax return.

Let me know if you need any help.

 

Lev and other Tax Specialists are ready to help you
Customer: replied 7 years ago.
Great .. thank you so much, I will accept answer, you are very good and clear.

Appreciate your warm words.

Please do not forget accept the answer - that is the only way I would be credited for the work done.

Let me know if you need any help with your tax issues.