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What should I do with my contribution to the Traditional IRA if the IRS later disallows a tax deduction?
Since the IRS is now asking me to pay taxes on the contribution to the Traditional IRA, should I convert it to ROTH IRA or should I withdraw it? If I withdrew the amount, the bank will inform the IRS of this distribution and treat it as an early withdrawal (I am under 59 and a half). How can I avoid that?
What are my options? Can someone please help me understand?
2 Answers
- Anonymous6 years agoFavorite Answer
You're not clear on WHY the IRA is disallowing the deduction for the contributions. Income? Excess contribution in a given year?
Edit: You can amend your tax return to include Form 8606 (nondeductible IRA contribution).
- ?Lv 76 years ago
What happened? Was your income too high or too low for a deductible contribution? Was it too high for any contribution?
If you have an excess you remove it--which is different than a distribution. Any associated gain is taxable, but it does not count as a distribution subject to penalty.
