Hi Bill,
I'm not sure which line the penalty is showing in because I am still in the middle of the Turbo Tax preparation of my tax return. I just checked and it says that I had an excess contribution because my EARNED INCOME was only $1049. This is because I put 90 percent of my income into the company 401K. My total Social Security/Medicare wages are $8429.00. The penalty actually looks like it is $300, not $2000. Sorry I overstated that. That is the current full taxes owed at the moment while I am preparing the Turbo Tax return.
So I guess I did not understand the IRA tax rules? I thought I could contribute to both a 401K and an IRA? But I did not realize that in contributing to a 401K, that it would reduce my EARNED INCOME? Is that what I did wrong? So my last question is, if I keep the money in the IRA, will I continue to be penalized each year? Or is this penalty (about $300 at the moment) a one time penalty? Thank you in advance.
