In 2022, I made Roth IRA contributions for my wife and myself for 2022 ($7,000/each). Later in the year, we received some inheritance that we found put us over the limit to make contributions for 2022. We discovered this in early March 2023 while doing our taxes online. I instructed our brokerage firm, Vanguard, to remove the excess contributions. As the funds were in a mutual fund, they ended up selling at a loss, and this was reflected in the amount that was removed. I also instructed Vanguard not to withhold any taxes on the removal/transfer to our settlement account. All was handled as I expected, but Vanguard has not sent me any 1099 form to date.
I have been working on my taxes with Live Assistance on properly reporting this, but seems to be getting different advice, and at one point saw that I was being charged the 6% penalty in my tax calculation.
- Can anybody advise how I should answer the series of questions pertaining to Roth contributions, especially the questions that asks "Enter Excess Contributions"? I initially entered the full $7,000 for each of us, but when I changed it to zero, the penalty went away. Which is correct?
- Will I need to complete a Form 5329, or will TT take care of this?
- Will I need to amend my 2022 returns if I receive a 1099 from Vanguard next year? I am assuming that since the contribution lost value that I do not owe anything.
Any guidance would be greatly appreciated as this is not a normal tax situation for me.
Thanks,
--Ken
