Thank you @DanaB27 for the detailed reply! I was drafting an update to my situation and saw you replied to my OG post so that answered some of the questions I was about to post. But here's the tricky part. I have my Roth IRA with CalSavers and they're no help at giving me the IRA balances I need to calculate the NIA, nor would they calculate it for me. I basically looked at my statements and backtracked the date/amount of contributions and change in value at the beginning/end of each quarter to find the earnings and the balances after each contribution. I found that the excess contribution started on the 6th contribution I made on 3/18/2024. So the 20 contributions I made since 3/18/2024 in the amount of $171.08 totaling $3,421.60, are excess. The total IRA contributions from both accounts would be under the max of $7,000 - $3,421.60 = $6,836.85. My next Roth contribution of $171.08 would push me over the limit.
I did the math for the CalSavers excess removal worksheet and it's as follows:
Excess contribution for 2024: $3,421.60
Total Earnings Calculation:
$13,246.28 (IRA balance prior to withdrawal 2/20/2025)
+ $0 (Withdrawals taken before excess removal)
- $7,635.36 (IRA balance prior to excess contrib)
- $4,003.77 (Excess contributions $3,421.60 plus subsequent contributions $174.65 + $174.65 + $232.87 made in 2025 for 2025 before excess removal)
- $0 (Time deposit or other investment penalties applied to excess removal)
= $1,607.15
Adj Opening Balance: ($7,635.36 + $4,003.77) = $11,639.13
NIA: ($3,421.60 excess * $1,607.15 earnings) / $11,639.13 adj opening bal) = $472.46
Withdrawal Amount: $3,421.60 excess + $472.46 NIA = $3,894.06
But according to IRS, the formula provided gave me a different withdrawal amount. From IRS, "If you need to determine the applicable net income you need to withdraw, you can use the same method that was used on Worksheet 1-3."
1 Excess contributions: $3,421.60
2 FMV ending bal prior to withdrawal: $13,246.28
3 FMV prior excess to excess contrib: $7,635.36
4 Minus 3 from 2: $5,610.92
5 Divide 4 by 3: 0.734
6 Multiply 1 by 5: $2,511.45
7 Add 1 & 6: $5,933.05 (This is the amount of the IRA contribution plus the net income attributable to be withdrawn).
Does the calculations look right? Which withdrawal method do you suggest I follow?
Regarding federal and state tax withholdings, is it recommended to indicate that on the withdrawal form? What's the guideline on that? My Federal income tax rate is 22% and my CA income tax rate is 9.3% for married filing jointly.
