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Retirement tax questions
No that doesn't sound correct. You don’t have to pay the 6% penalty on your 2022 tax return for the 2022 excess since you are removing the excess and earnings before the due date (or recharacterizing it). But you will have to pay the 6% penalty for the 2021 excess on your 2022 tax return since it was not removed by December 31, 2022.
When TurboTax asks about the value on December 31, 2022, including any contribution for 2022 made in 2023. Then you will enter the value on December 31, 2022, plus any contribution for 2022 made in 2023. If you didn’t remove the excess until 2023 then there should be a value in your account on December 31, 2022.
No, since you are removing the 2021 excess in 2023 you won’t have to pay the 6% penalty on your 2023 tax return. Next year, you will enter the 2023 Form 1099-R with code J and this will show that you removed the excess from prior years.
To confirm, you didn't enter the Roth IRA contributions for 2021 on your 2021 tax return? You have to enter the Roth IRA contribution for 2021 on your 2021 tax return and then TurboTax will automatically calculate the 6% penalty on your 2021 Form 5329 part IV. Therefore, you will need to amend your 2021 tax return to pay the 6% penalty on your 2021 tax return for the 2021 excess. Please see How do I amend my federal tax return for a prior year?
If you decide to withdraw the excess contribution for 2022 plus earnings then please be aware the earnings will be taxable on your 2022 tax return.
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