dmertz
Level 15

Investors & landlords

A regular distribution in 2022 does not correct an excess contribution made for 2022.

 

If you contribute $6,000 to a traditional IRA, you will have made a total of $7,500 in total contributions, but when you make contributions to both a traditional IRA and a Roth IRA, the excess is deemed to be in the Roth IRA even if you were otherwise eligible to contribute to a Roth IRA, so you won't have an excess contribution to the traditional IRA.  Since the $1,500 contributed to the Roth IRA is already an excess contribution, the contribution of $6,000 to the traditional IRA doesn't change anything with respect to excess contributions.

 

If in the past you have contributed more than $1,500 to the Roth IRA, your $1,500 distribution came from that contribution basis, making the distribution nontaxable.  If after the $1,500 distribution you have no money in Roth IRAs, that distribution will have satisfied the requirement to remove the excess.

 

If there was no investment gain or loss in the entire Roth IRA account while the $1,500 was in the account, you could make the argument that the $1,500 distribution was the properly gain/loss adjusted amount distributed, but this would require explanation to the IRS.  I don't know how the IRS would respond to this position.  Even if there was investment gain or loss, you could possibly make the argument that this distribution constituted some amount of return of contribution adjusted for gain or the entire excess adjusted for loss plus some amount of regular distribution, but again, I don't know if the IRS would accept this position.

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