Overcontributed to your Roth IRA? What steps to take?

What happens if you put to much in your Roth IRA or you become ineligible to contribute to your Roth IRA because your income was too high? This is not something you want to mess around with so it's really important that you keep track or have someone like jazzWealth help you. The IRS is very clear about the rules rgarding excess contributions to your Roth IRA and the max income you can have to contribute. Today Dustin will cover these topics with you....(read more)

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If you contribute more money than the allotted limit to your Roth IRA, you have made what is known as an excess contribution. It's important to be aware of this mistake and take steps to address it to avoid potential tax penalties. First, let's define what an excess contribution is in a Roth IRA. For the year 2021, the contribution limit for a Roth IRA is $6,000 if you are under age 50, and $7,000 if you are age 50 and over. If you contribute more than these limits, you have made an excess contribution. The IRS imposes a 6% tax on the excess contribution. So, if you contributed $7,000 instead of $6,000, the excess contribution is $1,000, and you must pay a $60 tax penalty. To fix such an issue, the first step is to identify the excess contribution and calculate the tax penalty. Once you have done that, you can choose one of two options to rectify the situation: remove the excess contribution or carry it forward to the following year. If you choose to remove the excess contribution, you must withdraw the excess amount, along with any earnings on the excess contribution. You must also do this before the tax-filing deadline, which is typically April 15th of the following year. This removes the contribution from your Roth IRA, and you won't receive any tax penalty. Another option is to carry forward the excess contribution to the following year. You may be able to avoid the penalty tax this way, but you will have to explain to the IRS what happened and why you chose this option. If you do decide to carry forward the excess contribution, you must still ensure that you do not exceed the contribution limit the following year. Otherwise, you will face the same issue. In conclusion, making an excess contribution to your Roth IRA can be an easy mistake to make. It is crucial to identify and address it as soon as possible to avoid any unnecessary tax penalties. Careful planning and staying aware of the annual contribution limits can ensure a smooth process, without any hiccups along the way. https://inflationprotection.org/overcontributed-to-your-roth-ira-what-steps-to-take/?feed_id=100794&_unique_id=646e5ee49541b #Inflation #Retirement #GoldIRA #Wealth #Investing #Excesscontribution #excesscontributionrothira #financialadvice #financialadvisor #financialeducation #howtorothira #incomerothira #investforretirement #investingservice #jazzwealth #JazzWealthManagers #maxincomerothira #onlineretirementinvesting #Retirement #retirementinvesting #retirementplan #retirementplanning #RothIRA #rothirainvesting #rothirarules #rothiratips #SaveForRetirement #VanguardIRA #Excesscontribution #excesscontributionrothira #financialadvice #financialadvisor #financialeducation #howtorothira #incomerothira #investforretirement #investingservice #jazzwealth #JazzWealthManagers #maxincomerothira #onlineretirementinvesting #Retirement #retirementinvesting #retirementplan #retirementplanning #RothIRA #rothirainvesting #rothirarules #rothiratips #SaveForRetirement