Failure to do so will result in a 50% penalty. If you make any contributions in excess of this $5000 max limit, you must ask your IRA custodian to refund you this amount (without any earnings or interest on it) before your tax-filing deadline date. If this happens, you must file IRS Form 5329 to claim this exemption. For every year that you make a non-deductible IRA contribution, or take an IRA distribution (withdrawal), you must notify the IRS by filling out the IRS Form 8606 which is available on the IRS website Failure to fill out this form will result in you paying tax on your contributions. You will be assessed a 10% early distribution penalty on this withdrawal (on the gross amount). If you fail to file this form, you will be assessed the 10% tax. Also be sure to correctly fill out the Form 8606 as any overstatements will result in a $100 penalty per each overstatement. If you are over 50 years of age, you are allowed an additional $1000 IRA Catch Up contribution thus totalling your max IRA contribution to $6000 in 2010. For instance, if you made an Excess IRA contribution in June of this year, you must remove this excess by April 15th, of next year. If you withdraw money prematurely from your IRA (if you are less than 59.5 years of age), this is known as an Early IRA Distribution.
Who Voted for this Story If you fail to file this form, you will be assessed the 10% tax.
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