topic Re: Roth Excess Contribution in Retirement tax questions

Roth Excess Contribution

GaryBr2 — Fri, 05 Feb 2021 23:38:08 GMT

My wife and I each have an excess contribution of $7,000 for our Roth accounts in tax year 2020. This was due to an increase in income but we should be below the Roth contribution limit in 2021. Can we pay the 6% penalty ($420) on our 2020 tax return and if we make no contribution to our Roth in tax year 2021 does that eliminate the excess going forward? In that way we are effectively reducing this years contribution (2021) by the excess amount from 2020. I think form 5329 can handle the tax penalty, form 5498 would still show $7000 in 2020, and if I understand things correctly I won't need a revised 1099.

Re: Roth Excess Contribution

ThomasM125 — Sat, 06 Feb 2021 00:08:08 GMT

That is correct, just don't make contributions in 2021 in an amount to even things out.

Capital Gains and Ordinary Income Tax Rates

GaryBr2 — Thu, 28 Oct 2021 02:44:31 GMT

Can you explain how capital gains and ordinary income are taxed? I understand that capital gains below 80,800 are not taxed in 2021 but does that 80,800 represent the capital gains portion of total income or total income? For example, if I had 50,000 in capital gains and 40,000 in ordinary income how would the tax rate be determined?

Re: Capital Gains and Ordinary Income Tax Rates

Critter-3 — Thu, 28 Oct 2021 14:16:10 GMT

Look at the worksheet for your answer ... it is on page 16 https://www.irs.gov/pub/irs-dft/i1040sd--dft.pdf