IRA excess withdrawal

Forum|Forum|3 years ago
April 4, 2023
4 replies
37 views

Hello

My husband and I file our taxes jointly but keep our finances separate (yes, this works for us, usually!) In 2021, he sold a rental house that he owned. Before he sold the house (before we knew he'd sell it that year) I contributed money to my Roth IRA. When I was doing our 2021 taxes, I found out that because of the sale of the rental house, it bumped our income up so high that I ended up with an excess contribution to that IRA. The amount was $2000 and so I took a distribution in that amount. The bank who holds the IRA sent me the correct form and I filed my taxes (reporting all of this) with no problems.

Doing my 2022 taxes, I was asked if I ever had an excess contribution. Yes I did and put the $2000 in again.

My question is, why is this being asked about again, I thought I had settled it by taking the $2k distribution in 2021? Will I have to report this one incident every year on my taxes? Is there anything else I need to know about this?

Hubby and I are both 62, if this has any bearing on your reply. I am self-employed, he is semi-retired and collects 2 pensions.

TIA.

MinhT1

Level 15

No.

Once you have asked for the return of the excess contributions (including earnings) and you have reported it in your 2021 tax return, the excess contribution has been fixed and you do not report it again. You should have answered No to the TurboTax question in 2022.

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squidladyAuthor

Level 5

I was afraid to say NO because that wasn't the truth...As long as you are sure this won't cause a problem I'll change my answer to NO then! It did ask about a "prior year" but maybe they mean "prior year but NOT FIXED YET" - is that the case, do you think?

DavidD66

Level 15

Yes, that would be the case. It is possible you could have made an excess contribution in a prior year, and not yet corrected the excess payment. In that case, the excess contribution is subject to a 6% excise tax for each year it remains in the account as an excess contribution. So, as MihnT1 said, answer NO and move on.

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