Errors When Attempting to Contribute to 2025 IRAs

[middle89]

I got this message saying that my IRA contributions are $7k in excess even though they are within the limit:

"Traditional IRAs

You had traditional excess contributions of $7,000.

To avoid a penalty you can withdraw these excess contributions before the due date of your return.

If you have withdrawn all or some of these contributions, enter the amount withdrawn below."

All I am entering is the $7,000 allowed for 2025. I didn't enter any excess. This message seems to imply that 100% of my contributions would be in excess.

My "Federal Tax Due" also went up from $9 to $395 after entering the contribution amount for some reason.

If I enter the $7k as a Roth IRA contribution instead of traditional I don't get the message about having excess contributions, but I do get the "Federal Tax Due" going up from $9 to $429 after entering the contribution amount. Which is even more odd because Roth contributions shouldn't affect my taxable income or taxes at all. And I would prefer to contribute to a traditional IRA this year if possible.

[dmertz · Accepted solution]

It would seem that you do not have any compensation from working necessary to support an IRA contribution, resulting in any traditional or Roth IRA contribution that you enter being subject to the 6% excess-contribution penalty.

Regarding the difference in the amount that your balance due going up differently between the traditional and Roth IRA contributions, my guess is that you made a traditional IRA distribution in 2025 and the basis in nondeductible traditional IRA contributions that results from making the excess traditional IRA contribution slightly reduces the taxable amount of that traditional IRA distribution, calculated on Form 8606 Part I.

[middle89]

Can you explain this second paragraph more?

"Regarding the difference in the amount that your balance due going up differently between the traditional and Roth IRA contributions, my guess is that you made a traditional IRA distribution in 2025 and the basis in nondeductible traditional IRA contributions that results from making the excess traditional IRA contribution slightly reduces the taxable amount of that traditional IRA distribution, calculated on Form 8606 Part I."

[dmertz]

I was making a guess as to why the change in taxes due was different for a Roth IRA contribution than it was for a traditional IRA contribution.   There could be a different reason, so if you want to understand why the result is different, compare the Form 1040 that is produced for each of these scenarios.