Excess IRA Contibution Removal?

Question

Hi,

For the tax year 2005, I happened to invest $1500 more than I am supposed to. I realized this in Jan 06(before my tax filing due date of 2005) and promptly removed the excess contribution along with the earnings. For the tax year 2005, I did not show any excess contribution withdrawal,i just mentioned the correct Roth IRA I am eligible for as invested, I thought I had to do that in 2006 as I did this act in Jan 06. But the custodian has given me a 1099 R with the code PJ and my tax software tells me that this means I have to correct my 2005 return. Can someone help me and guide me on this. It is just 86$ which is the earning on the excess withdrawal. What form do I need to file to correct this for 2005, will I need to do amendment of the 2005 tax return.
Is this an easy job or will I be better of going to a tax preparer. I have always done my own taxes.
Any help on this would be highly appreciated.

Thanks

One of the answers I received tells me that I need to figure my tax using Form 8606. What is that, wht do I need to do that, I just figured the new tax using the tax tables.

Answer 1

You need to pay 2005 income tax and a 10% penalty on the $86. File an amended 2005 return and use Form 8606 to figure the tax and $9 penalty.

Do it yourself, no big hurry for such a small amount of tax.

Answer 2

You properly withdrew the excess contributon and related earnings on time. But, did you claim the earnings as taxable income for 2005? If not, you will need to amend your 2005 return. If you did claim the earnings on your 2005 return, you can ignore the tax software's warning.