What happens if I contribute too much to my IRA or Roth IRA in 2022?
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- Опубліковано 28 лип 2024
- Explanation of the options to address an excess 2022 contribution to an IRA or Roth IRA
IRS summary of Modified Adjusted Gross Income limits for deducting 2022 traditional IRA contributions and making 2022 Roth IRA contributions - www.irs.gov/newsroom/irs-anno...
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DISCLAIMER: This video is only helpful hints and education. It is not specific tax, legal or investment advice. Before considering acting on anything you see in this video, first consult with your tax, legal or investment advisor. While the information expressed in this video is believed to be accurate, neither Andy Panko, CFP®, RICP®, EA nor Andy Panko EMC LLC make any representations to its accuracy.
Andy you are amazing! Thank you so much!
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I have $7000 Roth excess this year due exceeding MAGI limit, and I have a gain of $4000. so seems capital gain tax will much higher than 6% for excess. I amcontemplating to just pay the 6%excess this year, and withdraw excess next year since my income wont exceed MAGI limit next year. THanks for explaining the recharacterize IRA -that seems too much headache to track for me.
You can’t deduct a traditional IRA contribution if your MAGI is over a certain level.
@@RetirementPlanningEducation yes I am aware no deduction for Traditional.
Many thanks Andy ___This is an excellent video If one over contributes $6000 and withdraw $5000 after $1009 loss, can one claim the $1000 as a loss in one's tax fling to minimize total tax? Many thanks in advance for your help.
Unfortunately no; the loss isn’t deductible
I made an excess contribution of $1400 to my roth in 2021. The funny thing is... At that time I tried my hand in making my taxes using Turbo Tax. And at some point TT said I had excess. But I totally messed up my TT app, so I then tried H&R Block. There was no note about the excess. Again messed up H&R app. Gave up. Finally went to an accountant and made my taxes. She never asked me about my roth. So, now I remembered 2021 TT, calculated, and turned out TT was correct. I had $1400 excess in my 2021 roth contribution. And I have no idea what to do with this now. Any suggestion will be greatly greatly appreciated. I don't know what do. And that you so much for this video!
You have to eventually take the $1,400 out, ideally sooner rather than later. For every year you leave it in and don't take it out, you owe a 6% penalty on it, where that penalty is to be paid via Form 5329 in your tax return.
Also, if you made the excess in 2021 and haven't yet taken it out, you should have paid the 6% penalty on your 2021 return AND you'll have to also pay it again on your 2022 return. Therefore, if you DIDN'T include FOrm 5329 and the 6% penalty on your 2021 or 2022 return, you'll have to amend them to add in and pay the penalty.
@@RetirementPlanningEducation Thank you! I am going to make 2022 returns in a few days. So, I am going to call the custodian, take $1400 back. Then download two copies of form 5329, and fill it for 2021 and 2022( I hope my accountant knows what to do with this form). Amend my 2021 return. And while making my 2022 return, include 5329 for 2022 return. Oh... I hope I understood you correctly. Thanks again!
Hi, I overcontributed to my SEP IRA for 2022 I had Fidelity take the excess contribution and interest, but Fidelity didn't complete the reversal until after April 18th, 2023 (tax filing day) so I filed an extension. Now I'm not clear of my next step. Fidelity did not send me a 1099R like I thought they would, they said they would send at end of year. How do I report this fix on my 2022 income tax return on my extension? Any help would be greatly appreciated Thanks in advance!!
Great video. So if I contributed 6,000 to a Roth in 2022, had my broker recharacterized the contribution to a traditional before filing my 2022 and I'm not over an limit for contributing to a traditional. Do I simply deduct on the 6K on my 2022 tax return? thank you
I made an excess contribution of $2006 to my 403b account in 2022 tax year. I withdrew the excess contribution at a loss: $1664 in February 2023. Do I have to report this when I file my taxes this year?
Hi. Thanks for the vid. I recharacterized my ROTH into a TIRA then did the backdoor IRA (first time) before Dec 31 2022. From 6K am down to 5555. I have 2 1099 - r forms for ROTH and TIRA. How do i fill the 8606? Do I need to fill out another form for the recharacterization? I don't have any other IRAs except for the Roth. Any assistance would be appreciated!
The 8606 will reflect 1) the non-deductible contribution to the tIRA (which is what the recharacterization does...it makes it as if the Roth IRA contribution was actually a tIRA contribution) and 2) the conversion from the tIRA to the Roth IRA
@@RetirementPlanningEducation thank you so much!
Hi - thank you so much for the explanation. I contributed the full $6K in Feb 2023 for 2022 but later found out that my MAGI was a bit higher putting me in an excess position (I have not filed my 2022 taxes yet). I'm thinking of just calling fidelity to return the excess contribution (including losses). If I do this, do I need to fill in any supplementary forms to send to the IRS for 2022 tax year or even 2023? And if I do withdraw, what amount would I need to provide in my 2022 Tax Return for my contribution to my ROTH IRA for 2022 if I were to withdraw the full $6K (net of losses)? Would I just put $0? Thanks!
I made an excess contribution to my Roth (over the MAGI). In your video, you mention recharacterizing to a Traditional IRA. Once you Recharacterized to a Traditional, is there the option to convert the same amount back to a Roth again and not trigger any additional taxes?
Yes you can convert it back to the Roth IRA after it's in the traditional IRA. But as far as whether or not that conversion will be taxable, it depends on whether you have any pre-tax money in any IRA (specifically whether you have any pre-tax money in any IRA as of December 31 of the year of the conversion). If you do, the conversion will be prorated such that some of it will be treated as a conversion of the pre-tax money and some will be a conversion of the after-tax contribution that was recharacterized.
For example, if it's a $5k recharacterized contribution and you have $95k of pre-tax money already in your IRA, only 5% (i.e. $5k out of the $100k total) of the conversion will be tax-free. The other 95% will be taxable.
If I contributed to my Roth IRA via a traditional IRA backdoor and later took withdrawals before 59 1/2, do those withdrawals count as income (in addition to the 10 percent penalty) or does it not since I never took a deduction when contributing?
If it's after-tax money that was put into the IRA and then converted to the Roth IRA (and you didn't also have any pre-tax money in your IRA), the conversion won't be taxable. And if/when you take that money out, it similarly won't be taxed (or penalized).
It could be more involved that that though, as it depends if you made other contributions to your Roth IRA or made other conversions that WERE taxable. There is an "ordering" rule around Roth IRA distributions where the first money to come out is assumed to be your contributions. Then conversions that were taxable. THEN conversions that weren't taxable. Then finally any earnings.
Hi! I’m retired and on pension and I accidentally contributed $5,000 to my traditional IRA last Oct 14,2022. I have my IRA with JP Morgan Chase. They said they do not calculate the earnings on that $5,000. Is this true? I know that I need to withdraw that contribution and earnings before 4/18/2023 and I have to submit a withdrawal request to Chase. Am I suppose to get a 1099R from them right away to use it to file my taxes now for 2022, or is it gonna be for next year 2023. What forms do I use to tell the IRS that I did the withdrawals of the $5,000 and the gains, if any? Also, I immediately bought shares of stocks with the $5,000 and that stock went down to $3,500 and I sold it and bought a different one and that one had earnings. Is that earnings considered as gains still for that original $5,000 contribution or can I treat that $5,000 contribution as that it was a loss of $1,500?
Hi there. I am 60 years old. I made an excess contribution to my Roth IRA of about $3300. I removed it and asked my broker to send me a check. I already filed my taxes before I’ve discovered this in the state. Am I done? Or do I still need to file other forms? I only remove the excess contribution. I can still remove earnings and file the extension for October, but I need to know if that’s necessary. Is it possible that I’m all set because I’m over 59 1/2? I hope you see this and can answer. It is really confusing even with your good explanation. There seem to be so many exceptions with the Roth IRA. Thank you very much.
Just clarifying, because I am doing this by voice. I had already filed my taxes when I discovered this error.
@@janetm356 When you took the excess out, what was the final amount, inclusive of the gain (or loss) attributable to the contribution? In other words, the amount they sent you back should have been different than just the original $3,300 excess contribution.
@@RetirementPlanningEducation I only took out the amount that had me over the 7000.00 limit. So I think I did it wrong. Even though I’m 60 I still need to pay on the earnings? Thank you so much for answering. I am panicked!
Thank you so much for your great explanations on this confusing topic. It turns out I over contributed $190 for my 2023 ROTH in Feb of this year (2024.) If I return the over contribution and it's gain ($192.05) before I file my taxes this year, do I report the overpayment and/or it's removal at all on my 2023 tax return? I know I'll get a 1099 for the $2.05 gain for my 2024 taxes, I just don't know if I need to report any of this if it's been removed before April 15. Thank you!!
Hi. The income/interest will need to be reported for the year in which the excess contribution was originally made. In this case, based on what you said, you'll need to report the $2.05 as income on your 2023 return
I contributed more to my Roth IRA than earned income for many years. I am estimating that I will probably lose about
$15,000 to $20,0000 in excess contribution penalties.
Opening up a Roth IRA is going to be my worst
Financial mistake ever.
Why did you do that?
I retired in 2021 and had plenty w2 income that year.
In 2022, I still work part time coaching, and made $6477, so I put 6450 in.
I’ll do the same this year