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New Member
posted Nov 16, 2022 10:06:00 AM

Roth IRA

I invested the back door Roth IRA of 2020 in 2021 after the congress extended the tax return to Sep , and also invested backdoor Roth for 2021 in 2021 , when I filed the tax return for 2021 this year , I was told by the software that I over contributed amount of the Roth IRA , to make things simple , I withdraw 2001 contribution , after filed the tax and I found out that I get penalty for over contribution . How do I next 

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Expert Alumni
Nov 16, 2022 12:19:19 PM

Tax on excess IRA contributions

An excess IRA contribution occurs if you:

  • Contribute more than the contribution limit.
  • Make a regular IRA contribution for 2019, or earlier, to a traditional IRA at age 70½ or older.
  • Make an improper rollover contribution to an IRA.

Excess contributions are taxed at 6% per year for each year the excess amounts remain in the IRA. The tax can't be more than 6% of the combined value of all your IRAs as of the end of the tax year.

To avoid the 6% tax on excess contributions, you must withdraw:

  • the excess contributions from your IRA by the due date of your individual income tax return (including extensions); and
  • any income earned on the excess contribution.

See Publication 590-A for certain conditions that may allow you to avoid including withdrawals of excess contributions in your gross income.

 

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits