Before increasing my contribution for 2018 I checked the IRS guidelines and it stated that $6500 was the max based on 50+ years of age. Why is it subject to a penalty?
$6,500 *OR* your taxable compensation, whichever is *lower*.
(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deducible part of the SE tax, but can include commissions, certain alimony and separate maintenance, and nontaxable combat pay ).
See IRS Pub 590A "What is compensation" for details:
Roth IRA contributions can be reduced or eliminated entirely if your MAGI is too high
@Sunroper Your post shows you are using the TurboTax online editions. TurboTax online editions can only be used for a 2019 tax return.
If you need to complete and file a 2018 tax return you would need to purchase and download one of the 2018 desktop editions from this TurboTax website - https://turbotax.intuit.com/personal-taxes/past-years-products/
An IRA contribution for 2018 had to be made on or before April 15, 2019.
My apology. First time reaching out to community.
I purchased the 2018 Turbo Tax.
My contribution was made timely. I am 50+ and retired. I reviewed the IRS guidelines prior to making contribution but it states that I have made an excess contribution to my IRA. I simply do not understand.
TurboTax tells you the reason in the IRA contribution interview at the end - what does it say?
What type of IRA, Roth or Traditional?
Still working on the return. Got hung up on the IRA. Will attempt to complete the entry and will see what the interview at the end reports.
Thank you for your input.
I will research MAGI.
Also, if a Roth, is your filing status Married Filing Separately? If yes and you lived with your spouse anytime in 2018 the MAGI limit under $10,000 or you cannot contribute.