Roth Ira - Over Contribution

Hello,

I am confused about what is counted towards my ROTH IRA annual contribution limit ---

1.) Trade commissions I paid to buy stocks/funds for my Roth IRA --- does this count towards the annual limit?

2.) I had few extra dollars in my ROTH IRA account to pay commission if I decided to buy more stocks/fund --- for example I have about $50 on top of the annual limit lying as cash in my account, does this count towards my annual limit?

3.) I have enrolled in dividend reinvestment program, so all my ROTH IRA stock dividends get reinvested, does that account towards my annual limit?

4.) If any or all the above counts towards my ROTH IRA annual limit, how can I fix it?

Thank you.

Hardikrs,

Good that you are contributing to a ROTH IRA.

1) No.
2) If you contribute $5,050 to your ROTH IRA, you have over contributed.
You need to remove that extra $50 (and any earnings) from your IRA. It is easiest to do it before December 31. Any earnings would be taxed in the year you remove them from the IRA. There is also a 6% penalty per year if you leave the excess contribution and earnings in the IRA.
3) No. That is the idea of the ROTH IRA. The gains are taxed deferred until distribution and if you are over age 59.5 at the distribution time, the distribution of those gains will be tax free!
4) See number 2). Contact your IRA custodian and tell them you need to remove your excess contribution.

For your own learning, you should read IRS PUB 590, Individual Retirement Arrangements: http://www.irs.gov/pub/irs-pdf/p590.pdf

But first, you may be better off reading this article from Kiplinger: http://www.kiplinger.com/columns/starting/archive/2006/st0309.htm