Excess contributions to 2023 Roth IRA

[lucifer95]

Hi,

I have recently realised that I have excess contribution of about $2K to my 2023 Roth IRA based on my 2023 MAGI. I still haven’t done my taxes for 2024 and am below the contribution limit for 2024 Roth IRA and am eligible based on MAGI for 2024. I don’t have a traditional IRA but have an employer 401k.

Also most of this amount is in investments so I would have to cash them out and sadly they are mostly in losses.

Could I know what is the best course of action for me to reduce IRS penalties ? Can I rollover my excess contributions to the 2024 Roth IRA and reduce any penalties ? 

Thank you!

[DanaB27 · Accepted solution]

If you are able to make Roth IRA contributions for 2024 then you can apply the 2023 excess as a 2024 contribution. This is only done with steps on your return, do not involve your financial institution.

1.  Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Do you have any Excess Roth Contributions" answer "Yes"
5. On the "Enter Excess Contributions" screen enter the total excess contribution from 2023
6. On the "How Much Excess to 2024?" screen enter the amount applied to 2024

If you didn't pay the 6% penalty on your 2023 return (Form 5329 Part IV) then you will have to amend it and add the Roth IRA contribution. TurboTax will then calculate the excess contribution and fill out Form 5329 to add the 6% penalty. Please see How do I amend my federal tax return for a prior year?

[lucifer95]

Could I know if I have to amend my 2023 CA State taxes as well or is it only Federal ?

[DanaB27]

No, you do not need to amend the 2023 CA tax return.

2023 Instructions for Form FTB 3805P state: "California does not have taxes similar to the tax on excess contributions to traditional IRAs, Roth IRAs, Coverdell ESAs, ABLE accounts, Archer MSAs, or tax on excess accumulation in qualified retirement plans."