Solved: Need Help with Addressing Excess IRA Contributions for Tax Year 2024

SageofW · Feb 17, 2025 1:18:26 PM

Hello all, I have filed my returns for 2024 and this is the first time I was alerted by the Turbotax software that my contributions to my Roth IRA for 2024 are considered excess. This occurred because a conversion for my 401k to Roth 401k significantly bumped up my 2024 income to the limit such that the entire $7k contribution made to my IRA in 2024 is excess. I need help with the next steps to properly withdraw the excess amount as I am aware that I have to withdraw both the original contribution plus any earnings. This is my situation. I typically save $$ so that I max out my Roth IRA at the beginning of every year, so currently I have made $7k contributions for both 2024 and 2025 already. They are already completely invested in securities i.e. no cash in retirement account. When I filed my return for 2024, the 6% penalty was already added to the overall federal return amount. Since I have time to withdraw the excess amount before the filing extension deadline, what are my next steps? These are some questions I have:1. Should I calculate and withdraw the amount myself? From the IRS calculations, I would withdraw 7k + earnings calculated from the FMV the moment the excess contribution was added until the FMV when I withdraw the amount.2. Does the 2025 contribution impact my calculations in any way?3. Should I contact my bank (JPMorgan Chase) to assist in calculations and withdrawal process to make the withdrawal amount is accurate.4. I am aware that once I withdraw the amount, I will have to amend my file return and I will be receiving forms that involve the tax and penalty on my earnings. What are those specific forms? Appreciate anyone who can help out with this issue. I can answer any questions that clarify the context above.

Need Help with Addressing Excess IRA Contributions for Tax Year 2024

"B = value of the Roth IRA at the time the 2024 contribution was made plus that contribution"

No, B = value of the Roth IRA at the time the 2024 contribution was made plus both $7,000 contributions. See CFR 1.408-11 for the definition of the Adjusted Opening Balance:

https://www.law.cornell.edu/cfr/text/26/1.408-11#b

C= $7,000

A = $26,000

B = $15,000 + $7,000 + $7,000 = $29,000

NIA = $7,000 * ($26,000 - $29,000) / $29,000 = negative $724.14 (which is a loss)

To accomplish the recharacterization of the $7,000 contribution made for 2024, the amount transferred to the traditional IRA would need to be $6,275.86.