Roth IRA advice

Well, I figure this is as good a place as any to ask about this.

Back when I still had a job, I had an automatic contribution to a Roth IRA set up with American Funds. I canceled this contribution, or at least I thought I did. I just found out that they made an automatic contribution last week, apparently every monthly contribution except April had been stopped. The complicated thing is that they applied this contribution to the 2008 tax year. Now I am worried that I have to file an amended tax return, since I did my taxes way back in February, and now I have underreported my 2008 Roth IRA contribution by $334.

The other problem is I still don't have a job yet, so I don't exactly want to say bye bye to that $334 until I'm 60 right now. Here's what I can't figure out through various online searches... Can I just withdraw $334 now, not amend my tax return, and pretend like I never put it in? That's what I'd like to do if it's legal, but I can't determine if it is. All of the scenarios I find online with regard to withdrawals are for people who want to withdraw contributions AND earnings from their accounts, but I don't even HAVE earnings. The current total account value of my Roth IRA is around 30% less than I have contributed since I opened it in 2007.

I'm just now setting up an IRA with an Edward Jones branch. This guy is very nice, and would know immediately the answer to your question. Do you have someone like this you could ask? Your Roth has to be administered by someone.

Yeah, I'm gonna call him tomorrow but he's closed and I was here anyway :).

Since this would make your tax liability SMALLER(?), things aren't as bad as they seem. I imagine this sort of thing (needing to file an amended return) is sort of common this year. The IRS shouldn't give you too many probs since you did catch it fairly quickly.

A couple of issues here:

1. Someone withdrew $334 from one of your accounts and you didn't notice for over a year. Doode, you are just waiting for a phisher or other scammer to take whatever you have. Tighten up. Get Microsoft Money, even an old version like 99 or whatever and start keeping track of your ins and outs.

2. Your IRA people didn't follow your directions. Did you tell them in writing? Anyway, call them up, chew them out and see if they will send you the money back, adjusting the balance on your account.

3. Otherwise, an ammended return may be in order. It ain't that big a deal. If you hired someone to do your taxes, ask them, otherwise, just do it yourself. You'll probably get a few bucks back from the feds.

@Hess

1. No, I didn't notice for about 5 days. The contribution was made on April 15th 2009, applied to the 2008 tax year, and posted to my checking account Friday.

2. I can't remember now if I did it on the phone when I canceled my auto contributions, or if I did it online and somehow forgot to uncheck the box for April. It was a while ago, and I don't want to get all accusatory if it was indeed my mistake. I called American Funds, and they did offer to send a check for the current value of the shares I bought last week, but I declined since they are down $20 or so since then. And they also said they could not tell me what affect any of this would have on taxes. I don't want to accidentally make an ineligible withdrawal.

3. I did everything on turbotax online, so I will probably just do the amended return if I cant "un-contribute" it somehow.

OK, that's a bit better. 5 days we can live with. If you're saying it might be your fault, then you can't go off on a Level 2 or Level 3 (I have levels of aggressiveness when dealing with things like this) on them. In this case, uh, "don't ask for tax advice on teh 1ntr4w3b, yo," what I would do is file an ammended return and leave it at that.

Contributions to a Roth IRA are after-tax dollars and thus don't affect your tax liability. Additionally, contributions to a Roth IRA can be withdrawn at any time without penalty (because they're after-tax dollars). Therefore you can take the money back out without any Uncle Sam issues. How you get your IRA sponsor to do this is another question, but they should have a mechanism for it.

BTW, don't ask for or take tax advice from the internet. Also, I'm not your lawyer and you should consult a real one if you think that prudent. If you try to sue me for the above non-advice, I'll have Dr. Hess supply you with a big box store poof.

Yeah, I know what you esq types do... that $334 turns into $0 before I get done asking the question .

Well, thanks anyway for that advice that I shouldn't listen to . I was mostly just posting to vent about my annoyance at a chunk of money disappearing from my checking account.

Josh wrote: Yeah, I know what you esq types do... that $334 turns into $0 before I get done asking the question .

A guy walks into my office and asks, "How much do you charge for advice?"

I reply, "$500 to answer three questions."

He says, "Don't you think that's a little expensive?"

Me: "Yes, what's your third question?"

I think I am gonna sign up for the LSATs tomorrow .

Josh wrote: I think I am gonna sign up for the LSATs tomorrow .

Funny... although I just read an article about a TON of unemployed lawyers right now with huge student loan bills...

There are probably even more unemployed architects right now, with the same student loan bills. Except once the economy does get moving again, the lawyers will make enough to pay those loans back.

A joke one of our architects told me...

Young architect: "I've decided to be an architect..."

Old architect: "Ah... so you've decided to take a vow of poverty, eh?"

And I don't think 4 years of architecture college loans can even come close to law school loans...

Billy's correct. ROTH contributions are not pre-tax so your tax liability is nill unless you withdraw money from ROTH. However, for the same reason as above you can take out your contributions anytime tax free (since you've already paid taxes on them). Just make sure you're still under the 2008 ROTH contribution limit and you'll be fine.

I should say what Billy said...I'm not a tax professional so don't take my advice but that's what I'd do if I were in your situation - damn that didn't sound as good as Billy's discalimer.

I'm willing to offer disclaimer lessons for a nominal fee.

But Billy, if you accept payment for your disclaimer lessons, you'll have established an attorney-client relationship. That could get really complicated and potentially lead to a BBSP event

RussellH wrote: Billy's correct. ROTH contributions are not pre-tax so your tax liability is nill unless you withdraw money from ROTH. However, for the same reason as above you can take out *your contributions* anytime tax free (since you've already paid taxes on them). Just make sure you're still under the 2008 ROTH contribution limit and you'll be fine. I should say what Billy said...I'm not a tax professional so don't take my advice but that's what I'd do if I were in your situation - damn that didn't sound as good as Billy's discalimer.

This is correct. But I'm a carpenter, not an accountant. If I was an accountant, I'd know better than to answer this question online.

But I'm thinking you still need to file an ammended return, because I think you just made the same mistake I did.

When filing taxes, there are questions on the returns which ask you to enter deductable contributions to an IRA. The Roth is an IRA, but it is not deductable. You pay the taxes on this money as regular income, unlike other types of IRA's which are deductable.

If you reported the Roth contributions as deductable contributions to an IRA, you probably need to re-file.

My investment guy told me basically what I figured. They can just apply the contribution to 2009 instead of 2008, and I don't have to do anything to my tax returns. And if I decide I need the money after all, I can call him up and do a distribution for the amount I put in without any penalty.

Dr. Hess wrote: But Billy, if you accept payment for your disclaimer lessons, you'll have established an attorney-client relationship. That could get really complicated and potentially lead to a BBSP event

Arguably the lessons aren't the practice of law. Besides, I've been wanting to see a BBSP, so long as I'm not the recipient.

Yeah, we'll get Mythbusters to do an episode on the BBSP.