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Level 2

how to pay penalty on excessive roth ira contribution

Hi,

I contributed $750 over the $6000 limit. I was able to withdraw the excess amount through the financial institution. My understanding is the earnings generated by the excessive amount will be treated as an income. How can we report that income on turbo tax? (The financial institution 1099 for 2019 won't reflect the withdrawal since it was made in 2020.


Second question is about the early withdrawal penalty (how much?) if there is such thing (for people younger than 59) and how can we pay that to IRS?

 

Thanks.

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Expert Alumni

how to pay penalty on excessive roth ira contribution

Because you made the withdrawal before the due date for your 2019 tax return, you do not have to report anything this year and there is no early withdrawal penalty since it is considered a return of contribution.  Next year you will receive the 1099-R which will show the contributions plus earnings in box 1, and only the earnings in box 2a.  and box 7, with code "8"and  "J" which you will include on your 2020 tax return.

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Expert Alumni

how to pay penalty on excessive roth ira contribution

Because you made the withdrawal before the due date for your 2019 tax return, you do not have to report anything this year and there is no early withdrawal penalty since it is considered a return of contribution.  Next year you will receive the 1099-R which will show the contributions plus earnings in box 1, and only the earnings in box 2a.  and box 7, with code "8"and  "J" which you will include on your 2020 tax return.

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Level 2

how to pay penalty on excessive roth ira contribution

Thank you. So don't wait for Roth IRA form for this year? and file as I would normally would for this year (it comes around May 15th) 

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Expert Alumni

how to pay penalty on excessive roth ira contribution

That is correct, you do not have to do anything for 2019, just be sure to remember to get the form for the 2020 taxes.

@mujtabakhan89

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