Roth IRA

[xu1guang xu guang]

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]

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.

[Opus 17]

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...

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

[xu1guang xu guang]

The ROTH IRA I was trying to enter is repeating the box 12 DD on my W2 form. So you are saying it is not needed? Thanks.

[xu1guang xu guang]

correction:  Box 12 AA

[macuser_22]

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@xu1guang xu guang wrote:

correction:  Box 12 AA

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Code AA is a *designated Roth* which is part of your employers 401(k) plan and has nothing to do with an IRA which is an individual plan held in a financial institution by you.

It is entered on your W-2 and nowhere else.

[Opus 17]

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@xu1guang xu guang wrote:

correction:  Box 12 AA

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You don't have a Roth IRA.  You have a designated Roth account within your workplace 401(k).  It is only entered from your W-2, don't enter it again separately.  An IRA is an "individual" retirement arrangement, that you establish privately at a bank or brokerage.  You may be able to contribute both to a 401(k) and a Roth IRA, and there may be advantages of opening a private IRA instead of or in addition to the designated Roth account in the 401(k).  But they are not the same kind of account.