Please be aware that your Roth IRA contribution might be limited based on your filing status and income. If this resulted in an excess contribution the penalty is 6%. Please see 2018 - Amount of Roth IRA Contributions You Can Make for 2018 for the contribution limits to a Roth IRA.
Excess contributions are taxed at 6% per year as long as 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.
To avoid the excess contributions tax:
- withdraw the excess contributions from your IRA by the due date of your individual income tax return (including extensions); and
- withdraw any income earned on the excess contribution.
I contributed 6000 to my Roth IRA for 2020. When I entered that 6000 into my Roth IRA contribution, my refund went down. I think there is a bug for this software. My maximum contribution is 6000 for 2020. I didn't go over the limit but Turbo Tax reduces my refund
There are income limits tied to Roth IRA contributions. If your income is too high to allow you to make the maximum contribution to your Roth IRA, then you will be penalized with a 6% excise tax for the amount that was over-contributed and not removed from the account by the due date of your return.
If you fall in this situation, TurboTax will alert you on the screen in the section where you enter your Roth IRA contribution and give you instructions about what to do to avoid the excise tax.
Take a look at the following information from the IRS to learn more about the income limits imposed on Roth IRA contributions:
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