401K Employer Over Contribution Dilemma

[Ready]

This is not your only traditional IRA, right? Correct me if I am wrong, but I think that since you already have other traditional IRA money, you cannot just withdraw this basis and all withdrawals will be prorated on how much is considered already taxed based on form 8606.

Correct. I have another IRA with Vanguard. I called Fidelity today to review my options. They tell me I can’t leave the money in the IRA and add it to my cost basis because it’s an excess contribution, which contradicts what two Enrolled Agents told me. I didn’t feel like thinking about it any more so I withdrew the money today. Fidelity tells me I will owe a 10% penalty on any gains over the past year but most of the money was sitting in a cash management account so there were hardly any gains.