What do you do if you over contributed to a traditional IRA? If you made an excess contribution to an IRA, I go over some options that you have. Excess contributions are taxed at 6% per year for each year the excess amounts remain in the IRA. In case this ever happens to you, or someone you know, there are some very good options, including a backdoor Roth IRA conversion. So it’s really not something to worry too much about. Later in the video, I demonstrate how the backdoor Roth IRA conversion is reported on the tax form 8606. 💜 Show Your Support: Fuel Our Channel with a Cup of Coffee! ☕️ 📘 FREE EBOOK FOR ENTREPRENEURS! 📖 Transform Your Accounting - Learn Modernization Concepts in My Book Today! 👪 JOIN OUR FACEBOOK GROUP AND GET YOUR TAX QUESTIONS ANSWERED! 🔔 Subscribe for more videos just like this: Welcome to my Ask An Accountant YouTube Channel! My name is Noel Lorenzana, and I'm an Illinois licensed, Registered CPA. While I am an accountant, I'm not your accountant. By watching this video, no client relationship is created. On, this channel, I talk about simplifying taxes for individuals and entrepreneurs. Let me know if there is anything you would like me to discuss. Feel free to connect with me on Social Media. ★CONNECT WITH ME ON SOCIAL MEDIA ★ YouTube: Website: Facebook: LinkedIn: Twitter: 🎥 RECOMMENDED VIDEOS 🎥 🔆 Backdoor Roth IRA Explained: 🔆 How to Find a Good Tax Preparer: Thanks for watching my video on, What Do You Do if You Over Contribute to a Traditional IRA Disclaimer: This video, and the ideas presented in it, are for entertainment, and informational purposes only and should not be construed as accounting, tax, or legal advice. It is your responsibility to take all necessary steps to independently verify and ascertain that any information you choose to rely on from or take action based on this video is accurate. ⏱️VIDEO CHAPTERS⏱️ 00:00 - Traditional IRA Excess Contribution: What to Do if I Contributed Too Much? 02:26 - Backdoor Roth IRA Conversion: What is a Roth Conversion? 03:12 - Roth IRA Conversion Pitfalls 03:42 - How is a Backdoor Roth Conversion Reported? 04:41 - If You've Contributed Too Much to Your Traditional IRA 05:30 - Backdoor Roth IRA Process Explained Replay Video Link: #ira #rothira #rothconversion...(read more)
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If you've contributed too much money to your traditional IRA, you might be wondering what to do. Overcontribution to an IRA can result in penalties and taxes that can drain your savings. Fortunately, there are a few steps you can take to rectify the situation. The first step is to identify how much you have overcontributed to your traditional IRA. The limit for IRA contributions in 2021 is $6,000 if you're under age 50 and $7,000 if you're age 50 or older. If you've exceeded this amount, you'll need to withdraw the excess contributions as soon as possible. If you withdraw the excess contributions before the tax-filing deadline (typically April 15th of the following year), you won't owe penalties or taxes on the excess contributions. However, you'll still need to pay taxes on any earnings that resulted from the excess contributions. If you haven't withdrawn the excess contributions by the tax-filing deadline, you'll owe a 6% penalty on the excess amount for each year it remains in the account. Additionally, you'll owe taxes on the excess contributions and any earnings they generated. If you're ineligible to contribute to a Roth IRA due to income limits, you can consider a backdoor Roth IRA contribution as an alternative. This option allows you to make a contribution to a traditional IRA and then convert it to a Roth IRA. However, if you've overcontributed to your traditional IRA, it can complicate the process of executing a backdoor Roth IRA. To execute a backdoor Roth IRA conversion, you'll need to file IRS Form 8606. This form is used to report your nondeductible contributions to a traditional IRA, as well as any conversions you make to a Roth IRA. If you've made an overcontribution to your traditional IRA, you'll need to fill out part of Form 8606 to report the excess contribution. If you've already made a backdoor Roth IRA conversion but later realize you've overcontributed to your traditional IRA, the excess contribution will need to be withdrawn from the traditional IRA. This can complicate the process of executing a backdoor Roth IRA, as you'll need to amend Form 8606 to reflect the new information. You may want to consult with a tax professional to ensure you're following the correct procedure. In conclusion, if you've overcontributed to your traditional IRA, you'll need to withdraw the excess contribution as soon as possible to avoid penalties and taxes. If you're considering a backdoor Roth IRA as an alternative, be sure to carefully follow the proper procedures and consult with a tax professional if necessary. Filling out IRS Form 8606 is an important step in the process and should be done thoroughly and accurately. https://inflationprotection.org/form-8606-example-managing-over-contributions-in-traditional-ira-by-utilizing-backdoor-roth/?feed_id=94431&_unique_id=64547be174c4a #Inflation #Retirement #GoldIRA #Wealth #Investing #backdoorroth #backdoorrothira #backdoorrothiraconversion #backdoorrothiraexplained #backdoorrothiraprocessexplained #Backdoorrothiratutorial #excesscontributiontoira #excessiracontribution #iraexcesscontribution #rothconversion #rothconversiontaxes #RothIRA #rothiraexcesscontribution #rothiraexcesscontributionrecharacterization #rothiraexplained #rothirainvesting #rothiravstraditionalira #traditionalIRA #whatisarothconversion #BackdoorRothIRA #backdoorroth #backdoorrothira #backdoorrothiraconversion #backdoorrothiraexplained #backdoorrothiraprocessexplained #Backdoorrothiratutorial #excesscontributiontoira #excessiracontribution #iraexcesscontribution #rothconversion #rothconversiontaxes #RothIRA #rothiraexcesscontribution #rothiraexcesscontributionrecharacterization #rothiraexplained #rothirainvesting #rothiravstraditionalira #traditionalIRA #whatisarothconversion
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