IRA Excess Contribution 6% Penalty Explained.
How to fix excess Roth IRA contributions (step by step)
/////////////////////////////////////////////////
Get answers FASTER…
Join this channel to get access to perks:
Chat on discord:
Join Link
Support on Patreon:
Get IRS FORM W4 TAX WITHHOLDING HELP HERE
—————————————————–
Are you ready for professional investment advice? We can help you with financial planning and asset management. Let us guide your investments to your financial freedom. START HERE
Our financial planning process is an ongoing relationship because as you grow, your financial plan grows with you. At Sickle Hunter Financial Advisors, we believe that saving and making sound financial decisions will help improve your life’s changing needs and objectives. Retirement, college planning, wealth building, social security, and career benefit packets are only a few of the financial decisions that you may face in your lifetime and we’re here to help guide you.
TRAVIS T SICKLE, CFP®, EA®, AAMS®, CRPC®, RICP®
CERTIFIED FINANCIAL PLANNER™
Company Website:
twitter: @travissickle
Instagram:
Facebook:
LinkedIn:
Sickle Hunter Financial Advisors
1646 W Snow Avenue
Suite 144
Tampa, FL 33606
Check out Google Business Profile
——————————————————-
Gear Used in Videos
Partnership referral links
Aura Identity Theft Protection *Up to 50% off* HTTPS://www.aura.com/travis
All Amazon links are affiliate links
____________________________________________________________________________
Information in this video is for educational and entertainment purposes only.
sicklehunter.com/disclosures
____________________________________________________________________________
#travissickle…(read more)
LEARN MORE ABOUT: IRA Accounts
CONVERTING IRA TO GOLD: Gold IRA Account
CONVERTING IRA TO SILVER: Silver IRA Account
REVEALED: Best Gold Backed IRA
Contributing to an individual retirement account (IRA) is a smart move for planning your retirement. However, sometimes people contribute too much, which can result in an excess contribution penalty of 6%.
What is an excess contribution?
An excess contribution is any amount put into an IRA that exceeds the maximum allowable contribution for the year. For 2021, the maximum contribution limit is $6,000 for individuals under 50 years of age and $7,000 for those over 50.
Why is an excess contribution penalty enforced?
The penalty is in place to discourage people from exceeding the maximum contribution limit, which can result in inequitable tax benefits for those who can afford to contribute more.
How is the excess contribution penalty calculated?
The penalty is 6% of the excess contribution for each year it remains in the IRA. For example, if you contribute $7,000 and are only allowed to contribute $6,000, you have an excess contribution of $1,000. If you don’t remove the excess contribution, you will incur a penalty of $60 for each year that it remains in the account.
How to correct an excess contribution?
To avoid the penalty, you must remove the excess contribution and any interest it has earned before the tax filing deadline for the year in which it was contributed. If you do this, you will not be subject to the penalty, but you will still have to pay taxes on the earnings generated by the excess contribution.
If you fail to withdraw the excess contributions by the tax deadline, you will still have to remove them, but you will be subject to the 6% penalty. Furthermore, the penalty will continue until you withdraw the excess contributions.
Should I consult a financial advisor?
If you’re unsure whether you have made excess contributions, you should consult a financial advisor or tax professional. They will help you avoid penalties and ensure you’re on the right track for your retirement planning.
In conclusion, while contributing to an IRA is a great way to plan for retirement, you must stay within the contribution limits. The excess contribution penalty of 6% is designed to discourage over-contributing, and if you do find yourself in this situation, it’s important to correct it promptly to avoid incurring the penalty.
I filed my taxes and realized after I filed that I over contributed to my Roth due to income increases. I don’t qualify to contribute the 6k I contributed. Should I call to remove funds and have until 10/15 to amend taxes without paying a fee? What form would I use to amend?
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.
What do you do if the account is now less than the contribution?
So I made an excess contribution and I caught it before the tax filing deadline. Now I'm in the process of withdrawing my excess contribution. Do I pay any penalties on the withdrawal because I'm not retirement age yet? . . . Also, very clear and helpful video! Thanks
Classic government making every rule hard to understand and follow. Then trying to get you in trouble when you mess up.
Great video. Thank you for making it. What if you miss the October 15 tax deadline for the excess contribution amount? Do you then withdraw just the excess amount or do you also calculate NIA? What if there was a loss on the account? Lastly do you go back and amend that years tax return to report it or just report on the next years tax return. Thank you, love the videos and subscribed.
Thank you!
Travis, thanks for info. I must tell that had to take 2 Tylenol pills after watching this video. Why would anyone contribute more than limits set by IRS Duh! The IRS is about to hire 87,000 new agents. On Excess Roth IRA contribution, would making a smaller contribution following year fix problem ?
Awesome video! Thank you for the info! If you make a excess contribution would you get notified in some way, or would it show up in your account statements?
Thank you for sharing! What if I just realized that I over contributed for 2019 and 2020 ROTH IRA? What is the least painful move? Is is possible to go back and recharacterize? How do I go back and pay the penalties? Thank you