Roth IRA

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When I typed in Roth IRA contribution, I see the Federal Tax Due box increases. Why is Roth IRA contribution taxed and how?

macuser_22

Alumni - Champ

That is almost always because you entered an excess contribution and have a penalty on a 5329 form.

What does the last screen in the IRA contribution interview tell you?

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

**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.**

Opus 17

Level 15

First of all, please understand that a workplace retirement plan, even if it has a Roth account, is not an IRA. Although they are similar, they are different under the tax code and have different rules. Workplace plans are captured on your W-2 and you do not enter them later as if they were an IRA.

Then, if your tax increased, you may be ineligible or contributed too much. Your eligibility to contribute to a Roth IRA depends on your income, your filing status, and whether you are covered by a workplace retirement plan. See this chart.

https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020

If you made an excess contribution, you can remove it before April 15 to avoid the penalty.