Roth IRA Excess Contributions - Please help

[testervuly]

Hi all,

I got a new job which pushed my Modified Adjusted Gross Income (MAGI) above the limits allowable by the IRS to contribute to a ROTH IRA. I made a total contribution of $6,000 to my ROTH IRA at the beginning of 2021 for the year 2021. I already filed my taxes for 2021 and I already sent my brokerage a Letter of Instructions to withdraw the excess amount + income earned BEFORE the tax deadline, but I was told it was processed AFTER the deadline. 

Please tell me what I need to do to fix my issue. It's been such a headache figuring this tax stuff out. Thank you so much! 

[Mike9241]

did you extend your 2021 return? if so you have until 10/17/2022 to withdraw the excess without penalty. it's treated as if the contribution was never made. however, you must amend 2021 to include the income included in the withdrawal

if you did not extend you must amend 2021 to pay a 6% penalty on the excess also any income included must be reported.

[macuser_22]

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@testervuly wrote:

Hi all,

I got a new job which pushed my Modified Adjusted Gross Income (MAGI) above the limits allowable by the IRS to contribute to a ROTH IRA. I made a total contribution of $6,000 to my ROTH IRA at the beginning of 2021 for the year 2021. I already filed my taxes for 2021 and I already sent my brokerage a Letter of Instructions to withdraw the excess amount + income earned BEFORE the tax deadline, but I was told it was processed AFTER the deadline. 

Please tell me what I need to do to fix my issue. It's been such a headache figuring this tax stuff out. Thank you so much! 

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It you filed your 2021 tax on time then you have until the extended due date (Oct 15,. 2022) to remove the excess plus earnings.     You should receive a 1099-R next year with a box 7 code JP which must be entered on your amended 2021 tax return.    Nothing to do now and you have 3 years to amend.

[macuser_22]

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@Mike9241 wrote:

if you did not extend you must amend 2021 to pay a 6% penalty on the excess also any income included must be reported.

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Filing the 2021 tax return on time (before the due date) is the same as an extension (called an automatic extension).    (I forget the IRC sections that says that).  A separate extension is not necessary.

[testervuly]

@macuser_22 @Mike9241, Thank you both so much for the help. It's much appreciated!