Part One
When my daughter was 16 in 2020 she contributed $1,250 to her Roth. She was a dependent on our tax return, and she did not file her own return that year. Turned out, $1250 was not earned income. Whoops. So, we withdrew the $1250 from her Roth account to make things right.
First question set:
1. Does she need to file 2020 Fed AND State returns on her own, report her $1250 income and pay the 6% fine?
2. Does she also have to pay the 6% penalty on that $1250 on her 2021 return as well? If so, how to pay?
Part Two
In 2021, she contributed $6k to her Roth. It turned out she only had $2600 AGI income, and so should have only contributed $2600 to her 2021 Roth IRA. To fix this we removed the extra $3400 plus earnings from her 2021 Roth.
Second Question Set:
1. How does she pay her 10% fine on $3400 generated earnings for 2021?
2. Do these fines on the excess Roth contributions only affect federal returns?
Thank you
