Roth IRA Contributions

[ddorrer]

I have a question about Roth IRA contributions. I have a traditional federal retirement account and a Roth IRA which I started in 2022.  While completing my tax return, I was advised that since my household AGI is greater that the limit for a Roth IRA I would be penalized each year that I kept the money in that account.  My option would be to withdraw the calculated amount prior to filing my 2022 return. No problem. When I submitted the withdrawl request, I was told that I would be taxed on those 2022 contributions. That doesn't sound right since a Roth contribution was already taxed?  Does the fact that Im over 60 have any consideration in making contribution to my Roth, regardless of income?

[dmertz]

You are not permitted to resolve the excess Roth IRA contribution made for 2022 by taking a regular distribution, you must do so by requesting an explicit return of contribution by the due date of your tax return.  The Roth IRA custodian must then calculate any investment gain or loss attributable to the contribution being returned and distribute that as well.  An gain distributed is subject to tax (but no penalty since you are over age 59½) but the rest is a tax-free distribution of contribution basis.

The amount shown in box 2a of the 2023 Form 1099-R will be the amount in box 1 minus the amount of contribution being returned, but not less than zero.  Box 7 will have codes J and P.  Because code J is used to indicate that the return of contribution is from a Roth IRA but code J normally means an early-distribution, you'll need to claim an Other Reason exception on line 2 of Form 5329 to the early-distribution penalty that would otherwise be determined on any gain.