Retirement tax questions

You should withdraw your 2022 first as the deadline is approaching.  2023 is a possibility that you will need to do the same thing.

Use this link for information on how to handle the NIAs.  NIA Calculations and How to Handle them

For your last question, if you are definitely withdrawing 2023 contribution then make the adjustments for your calculations.  If you are leaving it in there a while then report actual amounts.

You won't face any penalties if you simply withdraw your excess contribution—plus any income it has earned in the meantime—by the due date for your tax return, including extensions.  

 Since you have established that you have excess Roth contribution, you’ll be subject to a 6% tax penalty on the excess amount for every year that it stays in the account.

You can either accept this 6% penalty or take measures to avoid it before the tax filing deadline (this includes any filing extensions you may have).

If you choose to pay the penalty, you then have two options:

• Apply the excess to next year: You can leave the excess contribution in the Roth IRA and apply it to next year’s contribution. Be sure to take this into account when determining your contribution amounts for next year
• Remove only the excess contribution after your tax deadline: After you file, you can request a regular distribution to remove the excess contribution (without earnings) between October 17 and December 31, 2023. You’ll have the 6% excess contribution penalty on the 2021 return, but you can keep the earnings in the Roth account, and can avoid the penalty on next year’s tax return

If you’d rather avoid the penalty, you have two options (both must be completed before your tax filing deadline):

• Withdraw the excess contribution plus earnings: Keep in mind that the earnings are included in your taxable income for the year the excess contribution was made, so you’ll still receive a 1099-R to report these earnings on your tax return
• Recharacterize the Roth IRA contribution as a traditional IRA contribution: Contact your plan administrator for guidance on this process. After you’ve made your recharacterization, see these instructions for how to record this process in TurboTax

Check the Roth IRA contribution limits for 2022 and 2023 to avoid future excess contributions based on your filing status and MAGI.

Contributions to IRA Accounts

@sclam2023