What action is required for an excess ROTH IRA contribution?

Forum|Forum|7 years ago
June 5, 2019
1 reply
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In 2017, wife and I contributed the max amount to our ROTH IRAs. Pay raise during year made me ineligible to contribute to ROTH IRA. Just realized mistake (aug 2018) and recently completed appropriate form with my bank and had the $5500 (each of us) contributions removed from our Roth IRA accounts. I think I am within the 6 month window described in Instruction for Form 5329 Line 23 instruction. Do I need to do anything with the IRS? File the 5329 and pay the 6% penalty? I do not see a reason to file an amended return as it was a ROTH contribution and I took no deduction. Thanks in advance.

TurboTax Deluxe Online

Anonymous

you were also required to remove any earnings thereon.

to avoid the 6% penalty take the excess contribution (and associated earnings) back out of the account. you have until the due date of your return (including extensions) to withdraw the excess in order to avoid the 6% penalty for the year

the earnings that you take out of the account will be taxable as income and (unless you’re over age 59.5 or you meet one of the other exceptions) subject to the 10% penalty for early distributions of earnings from a Roth IRA.

jerrydanyaAuthor

Level 2

Thanks for the helpful answer. Can I complicate my scenario? Bank only refunded the contribution - earnings stay in the account. And the confirmation statement for moving the money out of the account read like it was going to be treated as a distribution (obviously early since I am under 59.5). I am getting the sinking feeling that I need to file the 5329 to pay 6% penalty for the act of excess contribution, and going to get hit with 10% penalty on the same amount for early withdrawal.