Excess Roth IRA Contribution

Forum|Forum|4 years ago
April 6, 2022
3 replies
16 views

I made a Roth IRA contribution in 2022 for tax year 2021 before realizing my MAGI was over the limit.

Upon realizing this mistake, I withdrew the contribution and earnings before filing my taxes. My understanding is as follows:

1. Because I withdrew the contribution and earnings before filing my taxes, I avoid the 6% excise tax on excess contributions.

2. I will need to pay taxes on the earnings in 2023 for tax year 2022. These earnings are subject to the 10% early withdrawal penalty because I'm under the age of 59 1/2 and there is no way around avoiding this penalty.

Is this correct?

Not A Product Question

MinhT1

Alumni - Intuit

As the excess contribution was made for tax year 2021, the earnings are taxable in 2021. And are subject to the 10% early withdrawal penalty if you are under %9 1/2.

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pandasgorawrAuthor

Level 2

Appreciate the quick reply!

Just want to make sure I understand fully. Even though the contribution was made in 2022, the earnings were incurred in 2022, and I withdrew both contribution and earnings in 2022, the earnings are still taxable in 2021?

Does this mean I have to either manually calculate the tax in my filing due soon or amend my filing when my broker releases tax documents next year?

MinhT1

Alumni - Intuit

Your broker should give you now the amount withdrawn so you know the earnings. You should add in your 2021 tax return a form 1099-R reporting the total amount withdrawn in box 1 and the earnings in box 2a. In box 7 enter code 8 and J,

Next year, you will receive a 1099-R with code P and J in box 7. You can ignore it as it has already been reported and taxed in 2021.

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