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Excess Roth IRA contribution (work abroad)

Hello! Tax novice and would greatly appreciate any help. I began contributing to my Roth IRA account last year, and my turbo tax account is showing an "excess contribution" penalty because it is showing my earned income as $0. I live and work entirely abroad, and have filed my income under Foreign Earned Income and Exclusion. However, it doesn't seem to be calculated into the overall earnings (since it is still showing my earnings as $0). What to do?

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2 Replies

Excess Roth IRA contribution (work abroad)

Income excluded by the foreign earned income exclusion does not qualify as compensation for an IRA contribution. If your earned income is $0 because of the FEIE then you are not eligible to contribute to a Roth IRA.

 

Tax Champ @macuser_22 says: ‘The IRS is clear - to be used for an IRA contribution it must be “taxable” compensation. Excluded income is not taxable.’

 

Check out the complete discussion of this issue at Foreign income deduction and IRA contribution in TT.

Excess Roth IRA contribution (work abroad)


@SundayInSalem wrote:

Income excluded by the foreign earned income exclusion does not qualify as compensation for an IRA contribution. If your earned income is $0 because of the FEIE then you are not eligible to contribute to a Roth IRA.

 

Tax Champ @macuser_22 says: ‘The IRS is clear - to be used for an IRA contribution it must be “taxable” compensation. Excluded income is not taxable.’

 

Check out the complete discussion of this issue at Foreign income deduction and IRA contribution in TT.


IRS Pub 590A is clear - excluded income cannot be used to fund an IRA.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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