I have an excess contribution of $1500 for 2021 tax year, paid 6% penalty for that year but failed to take any corrective action so far. Now I am preparing my 2022 taxes and am getting frustrated with all the technicalities of how to withdraw the excess in order to avoid paying a penalty for 2022.
Because of the relative low penalty ($89), I would rather pay that amount again for 2022 and
choose to apply the excess to tax year 2023, since this 'seems' easy enough.
(I already maxed out the $7000 (>50 y.o.) Roth contribution for 2022 by mistake, so I imagine I cannot apply excess to 2022 then).
My assumption is all I need to do in order to make the penalty go away is make sure I keep the contribution for tax year 2023 at least $1500 below the max allowed for the year and Turbotax will automatically consider the excess from 2021 unwinded when I do my 2023 taxes next year. Further, I assume there is no need to calculate/report/withdraw any prorated earnings for the excess contribution made in 2021.
Q1: Are the assumptions above correct? If not, how does one choose to "apply excess to next year", in my situation?
Q2: Would you recommend an easier solution? (If I withdraw $1500 I will be penalized 10% since I am not 59 1/2 yet)
Thank you
