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rcs1
New Member

How is a corrective withdrawal from Roth IRA treated in subsequent tax years?

Hello, I realize there are a bunch of seemingly related questions on this topic but I can't figure out a straight forward answer, this is my situation:

In January I decided to start contributing to a Roth IRA not realizing I exceeded the gross income limit and made a 5.5k excess contribution intended for 2017.

In TT I followed the advice in the software to withdraw the $5504 that was in my account to avoid the 6% penalty that would have been incurred if I had left the amount in the account past the filing deadline (with no distributions or contributions showing in my filing for 2017.) 

I am well below the age limit for a qualified distribution, does this mean I will incur a 10% early withdrawal penalty for the 5.5k contribution I almost immediately withdrew in 2018? How will this situation be reflected in the forms for 2018?

Thanks!

1 Best answer

Accepted Solutions
MaryK1
Level 9

How is a corrective withdrawal from Roth IRA treated in subsequent tax years?

Because you made the contribution in 2017 but withdrew it before the due date of the tax return, you will not incur the 10% penalty.  Next year, you will receive a 1099-R for the $5504, if which the $4 interest earned while it was in your account will be income, the rest is return of your contribution and not taxed.

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3 Replies
MaryK1
Level 9

How is a corrective withdrawal from Roth IRA treated in subsequent tax years?

Because you made the contribution in 2017 but withdrew it before the due date of the tax return, you will not incur the 10% penalty.  Next year, you will receive a 1099-R for the $5504, if which the $4 interest earned while it was in your account will be income, the rest is return of your contribution and not taxed.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
rcs1
New Member

How is a corrective withdrawal from Roth IRA treated in subsequent tax years?

Thanks!
MaryK1
Level 9

How is a corrective withdrawal from Roth IRA treated in subsequent tax years?

Glad to help!
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
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