I am 61 yrs old and have just qualified for Social Security in Oct 2023.
In 2022, I contributed $7000 total to my Traditional IRA in 3 separate transfers from my regular saving account to my Traditional IRA account. I had only made $4000 unemployment in 2022, so I understand what I did was make an excess contribution. I did not realize this until now and two Decembers have gone and past so I realize I have two %6 penalties to make up for. I did not use the $7000 as a deduction for year 2022 as I didn't need to do so.
I understand that by using form 8086 I may be able to amend 2022 taxes and designate this as a none deductible contribution but I rather not do so as keeping track of its earnings is a bit too much for me.
I want to know how to proceed the best way and get a few questions answered.
Since the $7000 was not used in reducing my 2022 income, am I forced to claim it as a none deductible contribution then have to file form 8086 ?
Since the $7000 was not used in reducing my 2022 income and it was below the $7500 allowed for someone my age, when I have ETRADE remove it, will this $7000 be counted as income?
If the $7000 distribution Is not considered income, I may just want to leave it in and invest in a 9month 5.5% CD and distribute it before Dec 31, 2024 to avoid a third 6% penalty. Would that be sensible ?
If the $7000 distribution is considered income, then I may have to distribute it in 2025 as it may disqualify me for some programs that have income limits.
I have filled out form 5329 for 2022 with a 6% $420 penalty and have not sent it in yet with the check.
Thank You
