2762277
Just making an example: my salary amount allows me to make Roth IRA contribution, so I make $3000 Roth IRA contribution today, by the end of year, I lost all money on Roth IRA. However, I make quite some money from individual brokerage account later this year, which make me unqualified for making roth IRA contrition for 2022.
What should I do if I have already made Roth IRA contribution and lost my money on Roth IRA account? While it turns out later this year that I am not qualified to make roth IRA contribution. And I don't have anything left to be removed from Roth IRA.
Thanks.
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if your a/c goes to zero on 12/31/2022 and you make no '22 contributions in '23, your penalty would be zero. however, if you have multiple Roth accounts they must all be included in the 12/31/2022 valuation.
the answer is on form 5329 Part IV proforma'd for 2022
line 18 Enter your excess contributions from line 24 of your 2021 Form 5329. See instructions. If zero, go to line 23
line 19 If your Roth IRA contributions for 2022 are less than your maximum allowable contribution, see instructions. Otherwise, enter -0-
line 20 2022 distributions from your Roth IRAs (see instructions).......
line 21 Add lines 19 and 20...........................
line 22 Prior year excess contributions. Subtract line 21 from line 18. If zero or less, enter -0-......
line 23 Excess contributions for 2022 (see instructions)..................
line 24 Total excess contributions. Add lines 22 and 23..................
line 25 Additional tax. Enter 6% (0.06) of the smaller of line 24 or the value of your Roth IRAs on December 31, 2022 (including 2022 contributions made in 2023).
so if no excess from 2021 then the calculation is simple. 6% of the smaller of excess contributions for 2022 or the value of the ROTH on 12/31/2022 + any 2022 contributions made in 2023
so if the account went to zero on 12/31/2022 and no contributions for 2022 were made in 2023 there would be no penalty
but say the value on 12/31/2022 is $4,000 and you contributed an excess for 2022 of $5,400 all before 12/31/2022 the penalty would be 6% of $4,000. you would have until the due date of an extended return (even if you filed on 4/15/2023) to withdraw the $4,000 to avoid the penalty
If you timely filed your return without withdrawing the excess contributions, you can still make the withdrawal no later than 6 months after the due date of your tax return, excluding extensions. If you do, file an amended return with “Filed pursuant to section 301.9100-2” entered at the top. Report any related earnings for 2022 on the amended return and include an explanation of the withdrawal. Make any other necessary changes on the amended return (for example, if you reported the contributions as excess contributions on your original return, include an amended Form 5329 reflecting that the withdrawn contributions are no longer treated as having been contributed).
"so if the account went to zero on 12/31/2022 and no contributions for 2022 were made in 2023 there would be no penalty"
Not sure what it means. Let me make a detailed example: I make $6000 roth IRA contribution now, and the account goes to zero on December 31, 2022. By the time, I find out that I am not allowed to make roth IRA contribution, so what should I do with those already contributed (now lost) $6000? In the future, my income does not allow to contribute any roth IRA anymore (assuming my salary significantly increases in 2023)
if your a/c goes to zero on 12/31/2022 and you make no '22 contributions in '23, your penalty would be zero. however, if you have multiple Roth accounts they must all be included in the 12/31/2022 valuation.
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