Yes, you are not allowed to over contribute to an IRA.
If
you already made a contribution
and you're above the modified adjusted gross income (AGI) limits, it's
considered to be an excess contribution and
is subject to penalties.
Retirement
can be a complex area of your tax return. There are several options available
for correcting excess contributions. However, not every option is applicable to
each situation. Therefore, we recommend you consult with your financial advisor
before taking any of the steps below to determine which option is the most
appropriate for your specific situation.
The
options available include:
1. Pay the penalty for an excess
contribution. You'll need to pay a 6% penalty each year that the excess remains
in your Roth plan. If a Roth IRA contribution is allowed next year (or any
future year), excess contributions can be applied up to the contribution limit for
that year and no longer subject to the penalty.
2. Withdraw the excess (including any money
you earned on it) before the filing deadline for your tax return. If you do
this, you'll need to correct the amount you entered in TurboTax as your
contribution.
3.
Recharacterize your Roth IRA contribution to be a traditional IRA contribution. That means that you instruct
the account trustee to move the money to a traditional IRA and treat it as if
that's where you made the original contribution.
Of
course, if you haven't yet made your
2017 contribution (you have until the due date of your return, including
extensions, to make IRA contributions) you can avoid this situation by simply not making the contribution.
