I have a Roth IRA and after having a CPA do my income taxes, I was told I could not contribute to my IRA last year because as a self employed farmer, I had a loss. (I didn't realize I had a loss for last year until my taxes were done a few days ago.) I contribute to my IRA monthly and now have to withdraw the money I put in last year, or pay a penalty. I have a part time job away from the farm as well. I am single and 51 years old. What would be the best way to deal with this? Either way, I believe I am going to have to pay a penalty, simply by leaving the money there or taking it out. Is there a way I can get around the penalty, or should I just pay it and move on? Does having the part time job help, or does it not since it is not connected to my self employed job as a farmer? I don't pay myself a wage for working on the farm.
Compensation from your part-time job should support a Roth IRA contribution. If this is a job where you receive a W-2, the amount on a W-2 that will support an IRA contribution is the amount in box 1 minus any amount in box 11. If the part-time job is self-employment reported on Schedule C, TurboTax will combine this with your farming loss to determine your compensation from self-employment available to contribute to a Roth IRA.
Leaving the excess in an paying an excess contribution penalty each year until the excess is resolved is usually not a good option. If you obtain a return of contribution, you'll only pay tax and penalty on the earnings required to be distributed with the excess.
Compensation from your part-time job should support a Roth IRA contribution. If this is a job where you receive a W-2, the amount on a W-2 that will support an IRA contribution is the amount in box 1 minus any amount in box 11. If the part-time job is self-employment reported on Schedule C, TurboTax will combine this with your farming loss to determine your compensation from self-employment available to contribute to a Roth IRA.
Leaving the excess in an paying an excess contribution penalty each year until the excess is resolved is usually not a good option. If you obtain a return of contribution, you'll only pay tax and penalty on the earnings required to be distributed with the excess.