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Retirement tax questions
Q1 Yes.
Next year on your 2023 tax return to absorb the excess in 2023:
- Click on "Search" on the top right and type “IRA contributions”
- Click on “Jump to IRA contributions"
- Select “Roth IRA”
- On the "Do you have any Excess Roth Contributions" answer "Yes"
- On the "Enter Excess Contributions" screen enter the total excess contribution from 2021 (if it wasn't carried over).
- On the "How Much Excess to 2023?" screen enter how much you want to apply to 2023.
Q2. You could just take a regular distribution in the amount of $1,500 (without earnings) since it is after the extended due date of the 2021 tax return. You would still have to pay the 6% for the 2022 tax return but the distribution would remove the excess from your 2023 tax return. But since this is a return of contribution (no earnings) it would not be taxable income and not subject to the 10% early withdrawal penalty.
- Login to your TurboTax Account
- Click on "Search" on the top and type “1099-R”
- Click on “Jump to 1099-R” and enter all your 1099-Rs
- Click "Continue" on the "Review your 1099-R info" screen
- Answer all the questions and make sure you enter the net contributions prior to 2023 (include the excess contribution for 2021 here) on the "Enter Prior Year Roth IRA Contributions" screen
- On the "Do you have any Excess Roth Contributions" answer "Yes"
- On the "Enter Excess Contributions" screen enter the total excess contribution from 2021.
Overall it seems option 1 would be easier as long as you are sure that you will be able to make Roth IRA contributions and are not limited by the MAGI. Please see Amount of Roth IRA Contributions That You Can Make For 2023 for additional information.
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