I'm working on my 2020 Federal income return with TurboTax. During the process, a box at the top of my screen shows the tax amount up to the info entered so far. I saw the displaced tax refund amount drops immediately after I entered my $7000 Roth IRA contribution. Then I went back and entered $0 Roth IRA contribution, the tax refund amount went up back as before. I know Roth IRA contribution won't reduced my tax, but it shouldn't increase my tax either. Please explain.
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It will increase your tax if you are not eligible to make the Roth IRA contribution based on your income for the year. That would mean that you have an excess contribution and you will pay a 6% excise tax on the excess until it is removed from the IRA.
Take a close look at the screens in the Roth IRA section of your return. If you do have an excess contribution, there will be messages to that effect along with information about how to fix the situation.
And if you are married be sure the IRA Contribution and the income are entered for the right spouse.
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