Roth IRA excess contribution

[shreddedshoe6]

I contributed $4530 in 2022 to my Roth IRA.  While doing my taxes, I discovered I was ineligible to contribute and have since removed the entire contribution.  I did not have any earnings.  I reported the excess contribution and subsequent removal, however while reviewing my forms before filing, the 5329 is showing that I am being taxed 6% on the contribution amount even though I have removed it.  I have not filed my taxes yet.  Why am I being taxed if I removed the contribution before the filing deadline?  Thank you.

[Mike9241]

Don't enter anything in your 2022 taxes since you withdrew the excess Roth before the due date of your 2022 tax return.  That 2023 1099-R will report the excess contribution in box 1, a zero in box 2a  the codes in box 7 tells that IRS that it was the withdrawal of an excess contribution from a Roth by the due date, and the zero in box 2a tells the IRS there is no income to report or enter the Roth and then go through the questions to indicate you withdrew the excess before the due date of the return. no 5329 will be submitted to the IRS under either method.

[shreddedshoe6]

Thank you for such a quick reply.  Ok, so just to clarify…where TT asks me if I made an excess contribution I say no…basically I treat this like it never happened, since I removed the contribution. I’m not reporting anything at all.  

[DanaB27]

Yes, you will answer no to TurboTax's question if you have an excess contribution because you did not have any prior year excess contribution. This question refers to the excess contribution made in prior years that were not removed.

You won't have any penalty because you removed the 2022 excess contribution before the due date of the 2022 tax return.

@shreddedshoe6 

[shreddedshoe6]

Thank you so much for the clarification.