Traditional IRA?

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L1: Traditional IRA?In November 2009 I created an E-Trade Traditional IRA. While doing my taxes, Turbo Tax won’t allow a deduction based on our gross income being to high, and having retirement programs through our work. Will I have to pay taxes and penalties to remove this money? It seems crazy to be double taxed.2010-01-31 12:34, By: MrWillys, IP: []
L2: Traditional IRA?I found the answer under the links page IRS Publication 590 page 31. As long as I withdraw the money prior to filing my taxes I’m ok.Now I’ll have to choose between a standard account, or a Roth? Any suggestions will be appreciated.2010-01-31 14:15, By: MrWillys, IP: []

L2: Traditional IRA?You have the following options:1) Since you are using Turbo Tax, try entering your contribution as a Roth IRA contribution to determine whether your joint incomes will allow a Roth contribution. If OK, then you can ask E Trade to recharacterize the contribution as a Roth IRA contribution. While you cannot deduct it, you will not have to withdraw anything and pay tax and penalty on the earnings (if any). A Roth contribution is always better than a non deductible traditional IRA contribution.2) If your income is also too high for a regular Roth contribution, you can leave the contribution alone as a non deductible TIRA contribution. You would need to file Form 8606 to report the non deductible TIRA contribution. If and when you want to convert to a Roth IRA, the portion coming from non deductible contributions will not be taxed. Anyone can convert to a Roth IRA in 2010 and beyond. Any taxable income can be reported half in 2011 and half in 2012 for 2010 conversions.3) If you don’t prefer either of the above, you can ask E Trade to return your contribution. If there are any earnings, they must be reported on your 2009 return and you would owe a 10% penalty on the earnings portion only unless you qualify for a penalty exception. I don’t think you are yet 59.5. There is no tax on the return of the contribution amount, since you did not deduct it.Note: This site is for 72t plan discussions. While you did not mention anything about a 72t and you cannot make a contribution to a 72t IRA, I assume you do not have a 72t plan. If you do, please advise.2010-01-31 20:10, By: Alan S., IP: []