Economic stimulus rebate checks may push retirement accounts over the limit.
Did you have your regular tax refund directly deposited into a traditional IRA or Roth IRA, or into another tax-favored plan? If so, your economic stimulus rebate was sent to the same account. That's fine, unless this second deposit put you over the contribution limit for 2008. Even if you realize it and withdraw the excess amount, it'll be considered taxable income and you'll be hit with an early withdrawal penalty if you're under age 59½. But this time around, the IRS is willing to cut taxpayers a break. It'll waive any taxes and penalties if the excess amounts are withdrawn prior to the due date for filing your 2008 return. However, your financial institution may not be so kind, warns J.K. Lasser's Monthly Tax Letter. It may charge a fee on the contribution and impose a penalty when it's withdrawn.