How to fix and avoid the Roth IRA excess contribution penalty

[@sergioca1208]

Hello. Thank you for your videos. I opened 2 ROTHs for 2023. I messed up and contributed $7500 to each one. How do I correct it? Appreciate your help.

[@DG-gz2hc]

If I were to just take the excess contributions out, will the brokerage be able to perform the calculations to determine how much excess+taxes for any gains be? Or would I have to perform the calculations myself and hope I've done it correctly and request that amount be withdrawn? (for example, early withdrawal taxes and NIA) Thanks! Great content!

[@TravisSickle]

Depends on the brokerage firm. They can likely do it for you but I don’t think they are required. Don’t just take a distribution, make sure it’s coded on the 1099-r correctly. You can do that by telling them it’s an excess removal.

[@glenday1]

Great videos about this Topic!! I have made numerous Excessive Contributions to my Roth and I was researching this and looking into removing them. I just talked with a CPA and he told me that there is a 3 year Statue of Limitations on Excessive Contributions from the filing Date for the IRS to catch it and notify you. In my research I did not see any mention of that. He said not to bother following up on all the paperwork, Forms and Taxable Gain worksheets because most of my Excessive Contributions were older than 3 years ago. Is he Correct about the 3 year Statue of Limitations???

[@larryjones9773]

Yes, there's a three year statute of limitations.

[@geenicah]

If I leave the amount in, how do I "reabsorb" for the next year? Just contribute less the following year?And will the 6% be a one time fee or every year?

[@TravisSickle]

July 19, 2023

[@leezhang9020]

Your explanations is so good . I have taken out 2019 to 2021 excess Roth contributions , broker said it will be normal distributions since taxes date past . I took 2022 excess before tax deadline line October 15, it can be a excess distributions. Now I did my 2023 Roth recharacterization to traditional ira , then converted to Roth - the backdoor IRA , -all this due to I realized we earn too much to qualify to contribute to ROTH . How can I do tax repotting, May you give step by step, thank you so much

[@TravisSickle]

Form 8606 How to fill out IRS Form 8606 for Backdoor Roth Conversions with 4 examples kzbin.info/www/bejne/hmWanGOEqLt6gKM

[@Aloneincrowd3]

last year i had no income but I contributed 6500 on JUly 31 2023, but now that I found out i was not supposed to contribute bcz i had no earned income.. no job..i have reversed it on MAY 8th 2024. WIll I get penalty or not? do I need to file 5329 form right now or when?

[@TravisSickle]

Sounds like you did it early enough to avoid the 6% penalty which would have kicked in if you didn't fix it by the October 15th deadline (you get an automatic extension to fix excess contributions which does not require filling out an extension to file your taxes, it's truly automatic). The 10% gets waived for any growth because of the Secure Act 2.0 eliminated that penalty for IRAs. The excess contribution was fixed timely so it's as if it never happened -- meaning no form 5329.

[@Aloneincrowd3]

@@TravisSickle I am an expact i have not filed the taxes yet... i was not planning to do it bcz of no income but now i will have to do it to report fixing of excess contribution right? Will i mention NO contribution on my taxes or Do i mention contribution and attach 5329 to show reversal?