Excess Roth contribution - how to correct

Forum|Forum|3 years ago
July 25, 2022
1 reply
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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!

TurboTax Self Employed Online

Mike9241

Level 15

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.

mikeshaw247Author

Level 2

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?