There are many reasons one could have what is known as an excess contribution to an IRA or a Roth IRA. The most common is simply that you contribute more than the Roth IRA contribution limit. Well, the IRS has pretty specific rules about how to fix an excess contribution and today we will review them.
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What if the contribution was made at another company and you didn't notice until after it had been transferred ?
Hi is it another possible way tell company who hold you ira account take the over funds money toward next year if you did Excess contribution for current tax year ?
What happens if my secondary insurance is non-HDHP but I’ve still contributed to an HSA for the past few years? How do I tell I’m being taxed that 6%? How do I calculate of much excess contribution I have?
Is there any way to get around keeping your cost basis the same when u transfer assets from your Roth IRA to a normal account.
Hi there could you please share your ideas how to fix over contribution in prior years as i was not deducting it on my return and when i try to fix it by withdrawing it in the following year before extension deadline in October 15th it. The SEP IRA custodian treats it as distribution and it will be charged as income plus 10% penalty which is unfair. As it was never deducted from income.
For example i overcontributed $1000 over my limit of let's say 7000. On my return in 2020 i only deducted as per my limit $7000 even i overcontributed $1000. Now in 2021 i transferring my overcontribution of $1000 back. And it is treated as distribution even though i never deducted it on my 2020 and i still have time with my extension till October 15th 2021. Let me know what you think.
I have a couple questions: 1. Do you have to fill out a form 5329 after requesting to remove an excess Roth IRA contribution? (also, is this related to "amending" your tax return or is this something different?) 2. Will there be any penalty if you simply overcontributed to the Roth IRA, removed the excess before the deadline, and no securities/investments were bought with the money (thus no unrealized/realized gains).
How do you check if you over contribute?
What happens after you remove the excess and earnings before the tax deadline? do you get a new tax form or just file as if you never made the contribution?
So if I made a SEP contribution of say $5K already in 2021 as a SE sole prop, I understand my net profit must be at least $25K for the year. But my deductions have been SUPER high last couple of years and I'm not sure if I can reach the $25K in net profit! If I want to leave the $5k I contributed in my SEP is my only course of action to #1) Lessen my deductions and/or #2) Earn more gross receipts? Thank you!
Very helpful! Wish you had a NY office!
My case is I (age 55) made contributions $7000 each to Traditional and Roth IRA .
, so total I put $14000 for tax year 2020, that is over maximum $7000/year
my question is when I file tax return 2020
Can I use Form 8606 to report traditional IRA $7000 (count as after tax money) ,
So I can keep the Roth IRA ($7000 +earning) , don’t have to do anything for Roth IRA account?
Thanks
thanks for posting this video.. This is something i am sorting out for 2019.. sadly.. i didn't get the excesse contributions out before the market tumbled in february and march.. And on top of that i contributed $7k in beginning of January for 2020.. so i got a double hit in february and march when all of that contribution took a major loss. . In march i had a loss on 2019 and 2020 contributions. is there a specific form that IRS needs to get with the taxes to document the excess contributions have been removed? What form is that? Also, I am hoping you can make an updated video on how to handle excess contributions that addresseses the changes congress/federal governement made in response to the pandemic.. such as changes in dates to file and filing for extentions.. and any changes that affected to dates that excess contributions can be removed without penalties or interest. (or?)?
Hi Jazz, thanks for your excellent explanation. I have one question for my situation. If I contributed excess $500 in May 2020, but at the end of 2019, my roth ira balance doesn't exceed my limitation, should I remove the $500 and file an amended tax as well?
I have a problem. I contributed to ROTH IRA directly (without backdoor method). I contributed $6K when in reality I could contribute $0 due to my earnings for that year. Since I put in the $6K, it has grown to $10K. How much in penalty due I own in this case and what is my options?
The example given at 2:42 did not make sense. Did he mean to say they contributed 6,500 and they shouldn't have because their income exceeded the MAGI
Happened to me. Turbo Tax run me through the process. Removed excess and what the penalty was.
I contributed 1400 for 2019 for a Roth ira. Closed that account and withdrew everything. Opened a new account a 3-4 months later with a different company and deposit 6000 for 2019. Was this allowed?
Thanks Dustin great stuff .
nice content