My wife and I determined that our modified adjusted gross income is too high to contribute to our Roth IRA. We are both under 60.
My Account:
- Opened Account 2020.
- Contributed $6,000 in calendar year 2021.
- Contributed $700 in calendar year 2022.
- Fair Market Value 12/31/20: $6,827.17
- Fair Market Value 12/31/21: $14,186.91
My Wife's Account:
- Opened Account in December 2021.
- Contributed $6,000 in calendar year 2021.
- Contributed $500 in calendar year 2022.
- Fair Market 12/31/21: $5,974.23
To avoid the 6% penalty each year you leave the money in the Roth IRA, I would like to withdraw the excess contribution from the Roth IRA, as well as any earnings. Here are my questions.
- I expect to remain over the income limit for 2022 as well. Can I treat both 2021 and 2022 contributions as my excess contributions for tax year 2021? (i.e. $6,700 for myself, $6,500 for my wife)? Or should I deal with 2021 calendar year now and wait until next year for the 2022 calendar year distributions?
- What is recommended sequence on actions to take?
- Withdraw ONLY Contribution Amount for 2021/Contribution Amount for 2021 + 2022
- Obtain 1099-R to figure out earnings from those contributions , proceed to take more money out OR
- Estimate earnings and take out contribution + estimate earnings.
- For my account, would estimated earnings be as simple as the following: [Value as of 12/31/21] - [(Value as of 12/31/2020) + (2021 Contributions)]
- For my wife's account, the total distributed is less than current value. Would I just remove the entire value of the account then?
Any guidance on all of this and the steps to take would be much appreciated.
