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glorifiedinHim
Level 1

How to journalize money that came from SEP-IRA overpayment.

Hello,

 

So we accidentally made an overpayment for 2021 SEP-IRA contributions and wanted to request a withdrawal. We reached out to our investment company, and they said they'll simply return the amount we requested as an overpayment. Now the problem is we got more than just the overpayment we requested. Before making the overpayment withdrawal request, the investment company representative told us that when we withdraw because of the overpayment, any earnings we have seen in the retirement account will be annulled by the percentage of funds we are requesting to withdraw from the total fund.

 

For example, if we invested $100,000 and made $10,000 in earnings but wanted to withdraw 40% as an overpayment from the $100,000, then the company would annul $4,000 of that earning.

 

We were okay with that and thought that the company would annul whatever earnings we had made in the retirement account. However, when we looked at our bank statement, they not only sent us the requested overpayment amount but also sent the earning by the amount that was supposed to be annulled. They didn't touch the earnings from the money that was in investment, but instead, they took out the money sitting in the retirement account as available cash. The company advised us that the earning that is supposed to be annulled will be taken care of when we file our taxes. We still need to take account of and journalize this earning that will be collected by the IRS, so we were wondering how we should journalize it. We know it can't be a simple deposit entry into the bank account. Thanks in advance for your help, and may God bless you extravagantly!

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