Summary of the corrective actions you can take when you contribute too much money to your Roth IRA
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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 Tenon Financial LLC make any guarantees to its accuracy….(read more)
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What if you contributed then rolled it over to another custodian, make another contribution then realize your income is going to be too high ? (note Before taxes are due) My assumption is that I would have to send money back to the first custodian and have them recharacterize it into a traditional (then backdoor into roth) and then send to the 2nd custodian, repeat process with them on 2nd contribution. Anyone thoughts?
Thanks for this very informative video! The situation you describe beginning at the 11:00 mark describes my dilemma. I was not eligible to contribute for tax years 2019, 2020 and 2021, but only realized that was the case earlier this year. I have an extension so I do not have to file until October. I understand what you said about my 2021 contribution, so I will have to pay tax on my earnings. As for 2020 and 2019, do I have to file a separate 5329 for both years, or do I can I account for both years on a single 5329 form?
Hi, I have been searching the Internet high and low to make sure I am going to do this right.
Every year, on January 1, I contribute max contributions to my Roth IRA as I was never in danger of going over the income limit.
This year, due to unforseen circumstances, I am sure I am over the income limit to even contribute a single dollar, meaning I am only eligible to contribute $0.
I am looking for the correct way to handle recharacterizing my $6k.
I have a workplace 401k, a traditional IRA (401k from 2 previous employers ago that I transferred to a traditional IRA instead of transferring to current employer 401k), and a Roth IRA.
Since I am wanting to recharacterize my excess Roth IRA contributions, do I need to empty out my traditional IRA into my current employer's 401k? Also since the economy is down, I wouldn't have made money on my excess contributions this moment in time, so does the pro rata rule still apply when I convert the money back into my Roth IRA?
I have a Roth IRA and its a CD I make sure I put the whole amount of money in the 7 months that it matures I just turn 50 so I put $7,000 now.
Thank you for addressing recharacterizing an excess contribution for 2021 as a regular contribution for 2022, that's the answer I was looking for!
Thank You so much for the video. I hope you can help me out with my situation here.
I contributed in Roth IRA last year for 2021 ($6K). Now I filed taxes couple of days back and my contribution was excess as my income came out higher (due to capital gains) than allowable limit. So, I am in very uncomfortable situation. I don't want to mess my tax but want to fix this Roth IRA contribution that I made. I also invested and it now dropped to $5K. So, my question for you: (1) Can I sell those stocks worth $6K cost basis with $1K loss (on the last day) and transfer to my checking account and leave as if nothing happened? I'm not sure if T+2 rule applies and whether I will be able to transfer remaining $5k on Monday (last day of tax filing for 2021). (2) If I want to move that to traditional IRA, when I do tax amendment, how much will it count ? $5K (current amount after stock loss) or $6K (originally contributed). Appreciate your help. Thank you.
Andy I own stock in my Roth IRA and I have over contributed. I know how many dollars I am over my legal limit, can I move stock to a traditional IRA that without selling for cash. I would like to keep what I own and just move it?
Context: I already filed my taxes yesterday for 2021. I made too much. I need/want to take that money out and close the account all together. Question: it wouldn't matter WHEN I liquidate the account (one day after filing or sometime between this year(2022)), right? I will have to file an amendment for this liquidation and pay the penalties on whatever gains I may from the account.
Hello, thanks for the video. I'm doing my taxes and contributed the max amount for my Roth IRA…. I didn't realize that I wasn't able to contribute more than my earned income. Turbo tax is saying I can pay a penalty of 6% as an option for each year I over contributed. Is this a good option as well? Or simply take the over contributed amount out…. what's the best?
Hi Andy, My custodian sent me an excess IRA contribution withdrawal form to fill out. I have an excess of small amount $150 that I need to take out from IRA according to turbo tax. Do I also need submit 5329 form along with my filling this year for 2021? Or I just need to wait for the 1099r for the 2022 filing for next year 2023 tax season. Thank you in advance
Thank you for the video Andy! Quick question, so if I decided to withdraw my excess contribution (in my case I took a loss without any additional earnings from my excess contribution) when will I be getting a 1099-R form to report? Also while filing my taxes currently, would I report that I contributed excess or the updated contribution total after withdrawing the excess?
Thank you for the great video! I am in this situation exact situation now and working to fix my Roth over contribution. If I recharacterize the money to a regular IRA, aren't I losing out on the tax money I already paid on it, just to pay taxes on it again later when I withdraw in retirement? Seems like it would be better to take my 10% penalty lump on the earnings, but get my original investment back whole. Or do I understand this wrong and the recharaceorized money would end up coming out of my earned income so I would get the tax break on it up front.
Excellent information Andy. Question, does the 5 year rule apply to the return of excess contributions? 2nd question, if I’m 72 can I do a recharacterization of an excess funds removal from my Roth IRA back into my Traditional IRA?
The stock market is still one of the most potential places to invest your money, The secrets to making a million is saving for a better investment.. I always tell myself you don’t need that new Bentley or that vacation in Hawaii just yet and that mindset helps me make more money investing. For example last year I invested precisely 84k grand in stocks and index funds with the help of my advisor Kate Weller and made 246k, I put it back and traded with her again and now I rounded up the year with over a million. Hoping to get to over 2 million in my portfolio in 6 months time..
If I overcontributed in 2021 and opt to recharacterize now and then proceed to convert that amount plus another $6k backdoor contribution for '22, is there anything I should be aware of in the conversion step?
Thanks Andy!! U always make topics easy to digest. I’m studying for E.A. exam!
Thank you Andy. Helpful video.
When you receive a 1099-R in the $1000 LOSS example, I understand there are no gains to pay taxes, but what about the 10% penalty? Would you still have to pay a 10% penalty on the $5000 withdraw, even though it resulted in a $1000 loss for the year? Or are you "clean" and you are only out the $1000 loss?
Here's my problem.. I unexpectedly sold a rental property which put me over the income limit for a Roth this year. I followed directions from M1 finance to remove that money from my Roth to a Traditional IRA, but I don't think I did it correctly. How do you do it and can I change the amount (i think i moved too much to my traditional ira)?
I started by saying I had a "quick one" I wanted to do with this video. This ended up being not nearly as quick as I thought it was going to be…sorry!