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Excess Contributions to Roth IRA

Bogleheads • View forum - Personal Finance (Not Investing) - www.bogleheads.org
I have spent the last two hours reading every thread I can find on here (Alan S. is a sage), and just want to completely nail down what I've compiled. I'm helping a friend with an issue revolving around contributing to a Roth-IRA for the past few years while making too much money.

Regarding the 2016 contribution, I was going to have this re-characterized as non-deductible. I believe at that point they'd pay taxes on earnings and that's it, as long as they're re-characterized before 10/17.

The treatment for the past years is where I get hung up. I know there's no way to re-characterize, and (I think) obviously it's not rollover eligible, so I believe I'd need to withdraw the entire amount. My friend has been paying the 6% excise yearly. When we distribute it, do I need to worry about 10% excise taxes & income taxes? I've read conflicting information on this and am just not 100% comfortable with a resolution. I believe they'd need to pay 10%+taxes on the earnings as they're under 59.5, but I'm honestly not sure. I believe the basis would come out clean, with no penalties or taxes.

I also believe an 8606 will need to be filed at some point to report the basis.

Thanks in advance for your help.
Date: Jun 20, 2017   


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