My wife and I are married, filing jointly for 2023. She inadvertently contributed more than the 2023 limit to IRAs. When we realized this last month (January 2024), we filled out a form with the bank to have the excess $500 removed, and moved into her brokerage account. With gains accounted, the website shows a 2024 IRA distribution of $526, in addition to 2023 IRA contributions of $4,400 (traditional) and $2,600 (Roth). In other words, the website still shows $500 over-contribution, but also shows the distribution of $526, which is meant to correct that over-contribution.
We're now trying to do our taxes using TurboTax Deluxe. Here's what we've done, and we're wondering if we did it correctly and what to anticipate in the future:
1. I contributed to a Roth of my own, wife contributed to her own Roth and traditional.
2. Wife contributed $4,400 to a traditional, before 01/01/2024. It was not recharacterized, and she is not covered by a retirement plan at work. No excess IRA contributions before 2023, no nondeductible contributions to her IRA. Not a repayment of a retirement distribution.
3. Wife contributed $2,600 to a Roth, before 01/01/2024. (This made the TurboTax federal refund tracker go down by $30, which makes sense - 6% penalty on $500 excess). It was not recharacterized. No withdrawals before 2023, no prior conversions, no past excess contributions. We then entered a Contribution Withdrawn Before the Due Date of $500. (This made the refund tracker go up by $30, suggesting removal of the 6% excess contribution penalty.) But should this be $526 including gains instead?
3. I contributed $6,500 to a Roth. It was not recharacterized, no prior conversions, no past excess contributions. Not a repayment of a retirement distribution. I am covered by a retirement plan at work.
4. This all results in a screen saying we qualify for an IRA deduction of $4,400. As far as we understand it, this is correct for married filing jointly given our MAGI and her not being covered by a retirement plan at work - it's the full amount of her traditional IRA contribution. The Roth contributions have already been taxed, meaning nothing to deduct? A little fuzzy on understanding this part.
5. Should we be expecting a 1099-R next year, to account for taxes to be paid on that $526? And what will we do with that on our 2024 taxes? Or is there a way to address that now, to avoid future complications?
Thanks in advance for any insight or clarity!
