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Excess Roth contribution - how to correct

DanaB27 seems to have the answer on this - so I am posting here as well as in the thread...

 

Hi Dana -

I made an excess ROTH contribution in 2021 (not enough earned income) of $7,000.  Doing my taxes in Turbotax in Dec of  2021, Turbotax alerted me to this.  I removed the $7,000, plus the profit made before the end of the year 2021.  I did this by filling out an excess contribution form provided by Merrill (my broker) documenting all that.  I did not report any Roth contribution on my 2021 tax return using Turbotax. Turbotax didn't seem to ask for the details of the excess contribution and the reversal.  So, in my mind, it never happened once I took the money out again.  Come May of 2022, I get a  5498 from Merrill showing I made a $7,000 Roth contribution for 2021. 

 

Do I need to do anything to let the IRS know that I did take the money back out in 2021?

Thanks!

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Accepted Solutions

Excess Roth contribution - how to correct

Thanks, Volvo Girl -

You are right, and I am relived to hear that.  My bank deposits from the Roth withdrawal occurred on Jan 14th, 2022. Thus, that makes sense. I'll get a 1099R in 2023 for that, and this will offset the May 2022 5498 which shows the 2022 Excess contribution.

 

Thank you again! I am so relieved now.

 

You've been a great help!

Have a great day!

Mike

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4 Replies

Excess Roth contribution - how to correct

since you put the money in and took it out in the same year 2021, there is nothing to report except that any income should have been reported on your 2021 return.

 

Excess Roth contribution - how to correct

Thanks, so much, Mike9241 !

It makes sense and I sort of felt the same, but...  Don't I need to worry that the IRS will see that 5498 from my broker saying I made a contribution to my Roth, and they'll know I had no earned income. Wouldn't the IRS question that discrepancy and issue a penalty?

Excess Roth contribution - how to correct

Didn't you also get a 1099R showing the withdrawal?  Maybe the withdrawal didn't get done until Jan 2022 so you won't get the 1099R until 2023.

Excess Roth contribution - how to correct

Thanks, Volvo Girl -

You are right, and I am relived to hear that.  My bank deposits from the Roth withdrawal occurred on Jan 14th, 2022. Thus, that makes sense. I'll get a 1099R in 2023 for that, and this will offset the May 2022 5498 which shows the 2022 Excess contribution.

 

Thank you again! I am so relieved now.

 

You've been a great help!

Have a great day!

Mike

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