I didn't realize until too late that I sent more than the $4000/yr contribution limit to my Roth IRA this year.

I'm not quite sure how I'm supposed to handle this though.

 

to two separate roth IRA accounts? if you only sent to one account, the brokerage firm might catch you.

 

Contact your broker ASAP and highlight the issue. Likely, they can perform a withdrawl and then deposit against the 2007 tax year. It is an accounting nightmare and you may suffer some fees, but it beats them automatically ripping the funds out, charging you further extra fees and sending a check in the mail.

[UPDATE]
As a baseline: The FED will assess a 6% penalty against any extra funds in the account and will require that the principal and any gains are withdrawn. This distribution will be taxable. So including standard trading fees at your broker and how much extra you really put in, you are probably looking at a wash. And a lot of paperwork. Yuk.

Failing that... there is an extreme solution:
Did you make deposits prior to April 16 without meeting the full contribution for the 2005 tax year? You might be able to refile your 2005 taxes to absorb deposits prior to April 16th.

 

I called Scottrade, and other than having to fill out some forms, I shouldn't be assessed any fees and such (I think since it is before Apr 15th). I'll just have to redistribute the excess, not sure if the stock will be sold and I'll realize short term cap gains or what.

$4000/yr is ridiculously low IMO. I thought IRAs were designed to encourage saving for retirement??

 

Yea, but they're supposed to be used in conjunction with other plans, like 401ks, which have the higher limits.

Or if you're self employed, you have different IRAs where you can contribute more than the 4 grand.

 

Scottrade had some standard forms I needed to fill out for over-contribution. Not completely painless, but not as bad as I thought. Then again, let's see how well TurboTax handles this.

 

I'm not a retirement account expert but it was my understanding that there was only a $4K limit on a traditional IRA and that a Roth IRA had higher limits? I've been told that a traditional IRA contribution is pre-tax and that the tax was deferred until you redeem it and that a Roth IRA was after-tax when you contribute and redeem it.

Can someone clarify?

 

Looks like same limits:
http://retireplan.about.com/od/rothandtrad...a/iravsroth.htm

 

Your broker or financial rep with your IRA, should have caught that to begin with. But get a hold of who you need and see if you can use it against next year maybe?