Excess Roth Contributions in 2023
I am a new community member and have a few questions for a CPA/tax expert. For the first time ever, we had excess contributions in my husband's Roth IRA in 2023 due to our MAGI being too high. On April 9, 2024, the IRA custodian processed the return of the excess contribution requested and earnings. The earnings resulted in our MAGI increasing slightly, so we still have an excess contribution, which results in a 6% excise tax. My husband will be 59 1/2 before year-end 2024. We are trying to decide our next step. Do we leave the 2023 excess contributions in the Roth and pay the excise tax in 2023 and hope that we can use/absorb the 2023 excess contributions in 2024 or do we request another refund of excess contributions and associated earnings before October 15, 2024 and amended our 2023 tax return.
If we leave the excess contribution in my husband's Roth IRA in anticipation of applying it to 2024 contributions, what happens if we cannot use/absorb the remaining 2023 excess contributions as 2024 contributions due to our MAGI in 2024 being too high? Since my husband will be 59 1/2 by year-end 2024, would taking the remaining excess 2023 contribution out as a distribution be allowed? If so, what would be the tax implications in 2024 of doing this and would we be required to take out the 2023 and 2024 associated earnings as well?
It is difficult to know how much of the excess to request as a return since it is hard to know what the related earnings will be as calculated by the IRA custodian until after the request is processed. Does the tax code allow us to request a return of the remaining 2023 Roth contributions of $6,520 and related earnings to totally clear up this issue? Or, are we only allowed to request a return of the actual excess contributions that would just get us within the limits?
Any insight is appreciated.
‎April 14, 2024
6:47 AM
