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How to reflect excess distribution I received from regular IRA account (brokerage).

  1. I rolled over 30K from one IRA to brokerage IRA (within same bank)

  2. I contributed $5500 to brokerage IRA (late March 2017)

  3. Before filing 2017 I asked called IRS and asked how I would reflect this (late March 2017)

  4. IRS says I am not eligible to deduct $5500 from my taxes because income is too high (per their rules) and my job already enrolled me in retirement plan (I work in City government)

  5. I filled out excess withdrawal form with new IRA (from bank) and $5500 was returned to me (early April 2017)

Bank says they have to report to IRS that they returned my $5500 even thought it was under Excess distribution withdrawal and I did not earn any interest on it, nor did I invest anything in IRA brokerage account.

When I asked the bank how to reflect this in future taxes, they say ask IRS.

I called IRS and no one is answering general questions right now.

And I'm unsure where to find this info in irs.gov website.

Please assist.

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First of all, from your description, it doesn't seem like there was an "excess contribution". There is no income limit for contributing to a Traditional IRA. As long as you have over $5500 of earned income that year, you can contribute $5500 to a Traditional IRA for that year, and it is not "excess".

There is an income limit for deducting a Traditional IRA contribution if either you or your spouse was covered by a retirement plan at work. Not deducting a Traditional IRA contribution doesn't make it an "excess" (you are allowed to not deduct it if you don't want or can't); it just makes it a non-deductible (after-tax) Traditional IRA contribution. There is no reason you had to withdraw it; you could have, for example, just left it there or converted the money in Traditional IRA to Roth IRA instead.

About your withdrawal, there are special rules for withdrawing contributions made before the due date of your tax return for the year you made the contribution. Assuming you have no other Traditional IRAs, you had to withdraw the contribution and the amount earned from it (which in your case was none). According to the Form 8606 instructions section "Return of IRA Contributions", you would put the amount withdrawn in Form 1040 line 15a, put the earnings part of the withdrawal (which should be none for you) in Form 1040 line 15b, and attach a statement explaining the distribution.

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  • Originally I contributed $5500 believing I could deduct from taxes. By chance I called IRS to re-confirm how to deduct this. That is when I was informed I am not entitled to deduct, hence I wanted to remove this amount from IRA brokerage account. – Artie Ladie May 10 '18 at 16:38
  • People over the income limit to contribute directly to a Roth IRA fairly often use the method of contributing to a trad IRA without deducting and (more or less immediately) converting to Roth; this is called a 'backdoor' Roth and there are quite a few Qs&As here about it, if you want to consider whether it would be good for you, although since you already have trad IRA (presumably deducted = non-basis) you delay some of the benefit. – dave_thompson_085 May 11 '18 at 13:56
  • @dave_thompson_085: The OP already withdrew it, so it's kind of moot now. – user102008 May 11 '18 at 16:54

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