topic Corrected "greater" to "lesser". in Retirement tax questions

Incorrect calculation of Roth IRA contributions by TT 2017 Deluxe

ceaser_one — Mon, 03 Jun 2019 20:13:08 GMT

TT is incorrectly calculating the Roth IRA and regular IRA contributions.

When i am entering my contributions for Roth IRA and traditional IRA, which total cannot exceed 5500. I am inputting the values in TT. When it is asking me my total value of ROTH IRA by 12/31/2017 it is also asking me to put in anything that i have put in after 12/31/17 but designated for 2017. So I put it in. My Regular IRA contributions were 775, my Roth IRA contributions are 4775. Therefore I am over $50 (total of 5550 instead of 5500 for the year). Next few screens, TT comes back and tells me that I have a penalty because i have an excess contribution of $525 in Roth IRA and I should withdraw. WTH? did the math just get screwed up in TT? How the hell does it calculate that I have over $525 access when the total for the year is 5500 and I at at 5550(between Roth IRA and Regular should not exceed 5500)? When I start again, going to the main screen of 2017 deductions and credits-> it shows my IRA contributions to be 5100. So I am not completely confused. how the hell is this thing calculating the wrong figures?

The only way I can get that result is if the taxable comp...

macuser_22 — Mon, 03 Jun 2019 20:13:09 GMT

The only way I can get that result is if the taxable compensation (money that you worked for) was either less than $5,500 or higher than the Roth contribution phase out amount.

I only get a penalty on $50. Go back to the IRA contribution section and un-check the IRA contribution boxes and continue to remove all contributions, then go back and re-enter.

See this IRS article for Roth contribution limits:

<a rel="nofollow" target="_blank" href="https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits">https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits</a>

I did that. entered the amounts. Now it comes back and t...

ceaser_one — Mon, 03 Jun 2019 20:13:10 GMT

I did that. entered the amounts. Now it comes back and tells me that I have excess contribution of $475 to my roth IRA. I believe the issue is the following question-->Value of ROTH IRA as of 12/31/2017. I have to put something here and I am putting in 4775 (even though I have already put the amount of 4775 earlier in the question when it asked me what I contributed to ROTH IRA in CY2017). if I put in anything higher than 4775, then the amount of excess contribution just goes up crazily. As I have said, the math TT deluxe is doing is incorrect. It should only look at what I have paid for CY2017 and not base the calculations on my total value of ROTH IRA at the end of CY2017.

The only reason TurboTax asks for your Roth IRA year-end...

dmertz — Mon, 03 Jun 2019 20:13:11 GMT

The only reason TurboTax asks for your Roth IRA year-end value is to be able to determine the penalty on the lesser of the excess in your Roth IRAs or the adjusted year-end balance of Roth IRAs. Only if your investments lost value or you took distributions from your Roth IRAs in 2017 will your excess contribution be greater than your adjusted year-end balance in Roth IRAs.

Corrected "greater" to "lesser".

dmertz — Mon, 03 Jun 2019 20:13:12 GMT

Corrected "greater" to "lesser".

Since you appear to be using the CD/download version of T...

dmertz — Mon, 03 Jun 2019 20:13:15 GMT

Since you appear to be using the CD/download version of TurboTax, you can see the calculation of the permissible Roth IRA contribution by switching to forms mode and viewing the Roth IRA Contribution Limit Worksheet.

Thank you for the help. I was under the impression that I...

ceaser_one — Mon, 03 Jun 2019 20:13:16 GMT

Thank you for the help. I was under the impression that I could invest up to 5500 in IRA+Roth IRA. That was a fallacy on my part. Apparently, ROTH IRA has a limit and that is based on your income level. I had to do more research (previous link provided by macuser_22 helped). TT Deluxe was not clear on that fact. Instead of telling me I had excess contribution, if it told me the reason why, it would have been great (bec it keeps telling me that i can contribute upto 5500 even in the pop up sections). Anyways, thanks for the help.

Solved in comments.

macuser_22 — Mon, 03 Jun 2019 20:13:19 GMT

Solved in comments.

i too believe TT is miscalculating excess roth contributi...

clapp-family — Mon, 03 Jun 2019 20:13:20 GMT

i too believe TT is miscalculating excess roth contributions. in my case, after several hours of trying to understand what TT was doing with various scenarios, i finally gave up and did a 1099-r in quicken to totally withdraw all my roth contributions and earnings. TT still says i made an excess roth contribution!

@clapp.family - You have tell TurboTax in the IRA contrib...

macuser_22 — Mon, 03 Jun 2019 20:13:21 GMT

@clapp.family - You have tell TurboTax in the IRA contribution interview that the excess has been removed.