topic Re: IRA deduction in Deductions & credits

IRA deduction

leedsalem — Mon, 23 Feb 2026 11:03:15 GMT

I contributed $7,000 to a simple IRA in tax year 2022 planning to take the deduction. However, unbeknownst to me, I was enrolled in my company's 401K plan. I'm therefore ineligible to take the IRA deduction.

Can I take the $7,000 back out of the IRA without incurring a penalty? I am 68 years old.

Re: IRA deduction

Anonymous_ — Fri, 06 Jan 2023 19:48:08 GMT

@dmertz can most likely answer your question so check back later.

Re: IRA deduction

fanfare — Fri, 06 Jan 2023 21:22:28 GMT

whether you can deduct it in your situation depends on your income.

Re: IRA deduction

fanfare — Fri, 06 Jan 2023 21:27:56 GMT

you can have the custodian return your funds to you by Tax Day, as long as you did not take a deduction on your tax return.

Re: IRA deduction

dmertz — Fri, 06 Jan 2023 22:24:27 GMT

You can request the the IRA custodian make an explicit return of the $7,000 contribution (not a regular distribution). The IRA custodian will make a distribution adjusted for investment gain or loss, accomplishing the return of the $7,000 contribution. The distribution will be reported on a code-P 2023 Form 1099-R that must be reported on your 2022 tax return if there are gains attributable to the $7,000 being returned. Be sure to decline any tax withholding on the return of contribution.

Re: IRA deduction

AmeliesUncle — Sat, 07 Jan 2023 23:57:46 GMT

The phrase you want to use is for them to "return the excess contribution" of $7000 (which basically un-does things, except for the earnings).

Re: IRA deduction

fanfare — Sun, 08 Jan 2023 01:36:45 GMT

@AmeliesUncle

Except it is not an excess contribution.

you can have the custodian return your current year funds (plus any earnings) to you by Tax Day,

Re: IRA deduction

leedsalem — Sun, 08 Jan 2023 02:33:30 GMT

Thanks for your help dmertz! The IRA is with Merrill Lynch. I’ll call them Monday. There are no earnings or losses associated with the $7K as I just deposited it before year-end and haven’t invested it. I really appreciate everyone’s feedback.