How to Protect Yourself From Tricky IRA Rules - SmartMoney.com: ""It's a wake-up call for anyone who has an IRA," says Martin Censor, a manager at the American Institute of Certified Public Accountants. "The government needs money. This is low-hanging fruit.""
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EXCERPT | " ... Making an "excess contribution" -- meaning you contributed more than the annual limit to a traditional IRA or made a Roth contribution when your income was too high -- can cost you 6% of the amount that wasn't allowed in the account. This can add up fast in cases where an excess contribution went undetected for many years. Sometimes, excess contributions also result when a transfer of assets from one IRA to another doesn't get done in the time allowed.
Arthur Elkin, a 60-year-old retired federal-government worker in Delaware, didn't realize he and his wife had made excess contributions to their Roth IRAs for seven years until he started working with a new accountant. Their income had topped the $150,000 maximum then allowed for making contributions, but their previous accountant hadn't caught the problem.
The couple had to file seven years of amended returns, withdraw the contributions and pay thousands of dollars in penalties and interest. The worst part, Mr. Elkin says: realizing that, had he kept preparing his own tax returns, as he had in the past, the software probably would have caught the error.
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http://www.seaprep.org/page.aspx?pid=598
http://www.smartmoney.com/retirement/planning/how-to-protect-yourself-from-tricky-ira-rules-1340738596512/
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