What is “the value of Roth IRA accounts”? is it total contributions? or overall account balance? when i put overall account balance it says i have “excess contributions”

[jupiterwhitekitt]

i know for a fact i didn’t contribute excess

[DanaB27]

The value of the Roth IRA accounts is the balance on December 31, 2022 (you can find it on your statement). To calculate the 6% excess penalty on line 25 of Form 5329 you use the smaller of the value on your statement on December 31, 2022 (and add any contributions you made for 2022 in 2023) or the excess contribution amount (TurboTax will ask during the IRA contribution interview about the value).

For 2022 the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than:

• $6,000 ($7,000 if you're age 50 or older), or
• If less, your taxable compensation for the year

Also,  your Roth IRA contribution may be limited based on your filing status and income. Please see
2022 - Amount of Roth IRA Contributions You Can Make for 2022.

Excess contributions are taxed at 6% per year for each year the excess amounts remain in the IRA. The tax can't be more than 6% of the combined value of all your IRAs as of the end of the tax year (therefore TurboTax is asking about your value during the IRA contribution interview).

To avoid the 6% tax on excess contributions, you must withdraw:

• the excess contributions from your IRA by the due date of your individual income tax return (including extensions); and
• any income earned on the excess contribution.

Please see What happens if I made an excess Roth IRA contribution for additional information.

[999dwdw]

I have $549 on my Roth value on Dec 31st 2022.  This $549 was 2021 contribution. Turbo tax ask to 'include any contributions after 2022 that were designated for 2022'. I contributed $6000 in March 2023 for 2022.  So I entered $6549 but the next page says my roth contribution was too high? Why?

Is Turbotax asking only 2022 contributions in 2022? Then it shouldn't ask the 'VALUE' on Dec 31st 2022.  'VALUE' IS ALL THE TOTAL including PRIOR CONTRIBUTIONS. Am I missing something?

I then only enter $6000 for the 'value' of Roth IRA, next page indicates my Roth contribution was too high???????  I changed it to '0' still indicates my roth contribution was too high. How do I fix this?  I am lost and confused

Can I skip this question since I only contributed $6000 and I didn't over contributed. Does it affect my future tax return if I skip this?

[DanaB27]

No, you will have to enter the Roth contribution and figure out why you are having an excess contribution. Because if you don't remove the excess contribution you will have to pay the 6% penalty on the excess contribution for each year the excess stays in the Roth IRA.

Did you have enough taxable compensation (wages, salary, self-employment income)? Retirement income, dividends, etc doesn't count.

Or was your modified Adjusted Gross Income (MAGI) too high to make Roth IRA contribution? Please see 2022 - Amount of Roth IRA Contributions You Can Make for 2022 for details.

Yes, you entered correctly $6,549. To calculate the 6% excess penalty on line 25 of Form 5329 you use the smaller of the value on your statement on December 31, 2022 (and add any contributions you made for 2022 in 2023) or the excess contribution amount.

If you have an excess contribution because you do not have any taxable compensation then you will have to remove the excess contribution plus earnings by the extended due date. Please request the withdrawal of excess contributions plus earnings with your financial institution. 

If your MAGI limits your Roth IRA contribution then please see What happens if I made an excess Roth IRA contribution.

@999dwdw 

[999dwdw]

I am still confused.  You said Yes, I entered $6549 correctly and I should pay 6% for excess contributions, the $549 was 2021 contribution, only $6000 was for 2022, I didn't over contribute. Am I missing something? Please clarify. Thanks.

[DanaB27]

The Roth value question (including the contribution for 2022 made in 2023) will only come into play if your total value would be less than the excess contribution made. TurboTax always asks this question if you made an excess contribution, it doesn't trigger the excess contribution. In your case, TurboTax will use the excess contribution for 2022 to calculate the 6% penalty (the smaller of the two values).

As mentioned above did you have enough taxable compensation to make a contribution?  Or is your MAGI too high to make the Roth IRA contribution? These two factors will trigger if the $6,000 is an excess contribution (or part of it).

@999dwdw