So why if you put unemployed on your Turbo tax, both spouse and yourself, it still triggers you at the end to put 7500 into an IRA to save on your taxes...We did that for 4 years now I am losing thousands paying back taxes on that money and on the taxes it saved us when we itemized and the money it is costing us for a CPA to get us out of this mess...and now that money will put us over 200,000 because taking that money out of the account and putting it into a brokerage account, gives us added income from that stupid IRA, that Turbo tax directed us to do...turbo tax algorithm should have caught we both were unemployed.....no IRA offer should EVER pop up..we just didnt know...Is this legal??
"all the money made on the IRA,"
Any gains you made on excess IRA contributions still in there past the tax due date remain in the IRA.
If you took gains out, that is a (another) mistake.
Unfortunately the 6% penalty adds up when two persons max out for four years with excess contributions.
"back taxes on that money and on the taxes it saved us when we itemized"
If an excess remained past the due date of your tax return, you would not have any itemized deduction savings to back out. IRA contribution does not impact your itemizing.
You only pay a 6% penalty per year on the accumulating excess. And, any earnings in your IRA stays there.
You can't get a tax saving from IRA contribution unless you had income.
You should discuss this with your CPA.
"putting it into a brokerage account, gives us added income from that stupid IRA"
removal of excess contribution is not income.
Maybe you need a new CPA.
right i get it, we could not get a cpa till may, it did save money on our taxes and we have to pay that back, plus had to get the IRA out of that account which took a 9000 tax hit, this could have all been avoided if turbo tax sees that both boxes of unemployed , then it should not trigger at the end for us to put 6500 into an IRA to save on taxes. we just followed the turbo tax, we didnt know you couldnt put into the IRA and not be employed, i did the taxes with putting it in and without putting it in and it did save us alot of the taxes..so thats why we did it, its not just turbo tax, the other software does it too....
We never needed a CPA before, we were only living on my SS and retirement check, again, algorithm should have caught that, i took the money out of savings to put into the IRA's to save on taxes.
If you got a deduction (savings) it means you were eligible for a contribution.
How did you come to discover now that you were not eligible?
when we were working with a financial planner, he noticed what happened and then told us, he doesnt do taxes but told us to search out a tax advisor and then thats when all this started.....
neither my husband and or I were working and yes it did reduce the tax owed, thats why im saying turbo tax should have an algorithm that stops that if you put down, not working, it should tell you to save by signing up for an IRA
That was just marketing. Turbo Tax asks everyone to contribute to a IRA. They can't look at your actual return. It asks me every year and I'm retired and not qualified. You should know if you are qualified or not, well you know now. Then if you made a IRA contribution (or wanted to check before making one) you needed to enter it into your tax return before you filed. That would have told you that you made an excess contribution.
As you are finding out, using Do-It-Yourself software such as TurboTax can be one of the most expensive ways to do your tax returns. I know many people use Do-It-Yourself software to try to save money, but it frequently has the opposite effect. A good tax tax professional would have prevented this mistake and can potentially assist with correct tax planning suggestions.
Afaik, TurboTax won't let you deduct an IRA contribution if you have no compensation.
So, unless you used override, and filed a paper return, I'm confused.
yep i know now, i did enter it all before i filed and it didnt tell me anything just lowered what we owed, stated i was on SSDI and husband unemployed, put numbers in with and without doing a contribution, it lowered the tax we owed, so we went ahead and put into the IRA, great marketing tool, because it screwed up royal...thank god we have the money to pay them, it just sucks because that money puts us up to 28% bracket:( and all the money made on the IRA, lost of course with what is happening with paying back the IRS. Hard lesson to learn
Weird! It should have told you that it was an excess contribution. Did you or spouse have any W2 income before your husband went on unemployment?
No it didnt tell me excessive contribution for the 6 years i did it, my husband never took unemployment, we were living on my SSDI and my FERS retirement check. thats why i think it sucks, i was just following turbo tax....just frustrating,
"all the money made on the IRA,"
Any gains you made on excess IRA contributions still in there past the tax due date remain in the IRA.
If you took gains out, that is a (another) mistake.
Unfortunately the 6% penalty adds up when two persons max out for four years with excess contributions.
@munoz124 Yes we sure would like to know how you entered a IRA contribution into your tax return starting 4 years ago. Did you use Turbo Tax? Did you maybe have a W2 the first year before you were unemployed? Did you have any 1099Misc or 1099NEC for self employment income? Could you have entered your SS or something else in the wrong place like on the Wages line on your 1040?