excess traditional IRA question

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Hi all finance gurus,I need your help with this issue I contributed nondeductible $5500 into Vanguard traditional IRA account for tax year 2015 in Jan 2016 and I realized that I wouldn't be eligible for tax deduction so I reversed the transfer using "excess contribution" by taking the money out right away. I later maxed out my IRA for 2015 at another financial institution. Today I see there is tax form 5498 for contribution of $5500 on Vanguard and I was told that I would get 1099-R for distribution or removing excess for tax year 2016 in 2017 as the actual distribution occurred in 2016. I already reported 5498 from my other IRA account. How should I report this chain of transactions to IRS? Without 1099-R for 2015 they will see that I have contributed a combined $11000($5500X2) to IRA. Also do I need to file form 8606 for the vanguard account as well? TIA.

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davidbeckham said:   Hi all finance gurus,I need your help with this issue I contributed nondeductible $5500 into Vanguard traditional IRA account for tax year 2015 in Jan 2016 and I realized that I wouldn't be eligible for tax deduction so I reversed the transfer using "excess contribution" by taking the money out right away. I later maxed out my IRA for 2015 at another financial institution. Today I see there is tax form 5498 for contribution of $5500 on Vanguard and I was told that I would get 1099-R for distribution or removing excess for tax year 2016 in 2017 as the actual distribution occurred in 2016. I already reported 5498 from my other IRA account. How should I report this chain of transactions to IRS? Without 1099-R for 2015 they will see that I have contributed a combined $11000($5500X2) to IRA. Also do I need to file form 8606 for the vanguard account as well? TIA.
  I dont know the precise  answer to your question. However, if you corrected the excess contribution by April 15 (by removing the excess and earnings attributed to it), you should be fine.

On a related note, this investopedia article indicates that "Last contribution is excess contribution."
Article said: If an individual made multiple contributions to the IRA, the last amount contributed is deemed to be the excess contribution.
 

That means you should have corrected the excess by removing from the latter contribution. Not sure how crucial that detail is.

 

Consider posting your question in the retirement sub-forum at fairmark.com



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