Mistaken 2021 Roth contribution question
Hi IRA Educated Community Friends,
Recently I made the mistake of having forgot I contributed to one of my Roth IRA accounts, when I had already met the contribution limit of 6K for this tax year, and wound up having to cancel or remove the payment. My question is because this was a Roth contribution that I made and then removed, did I pay taxes on this amount and lose that sum in the transaction or has the tax event on the contribution not happened yet as I have not submitted my 2021 IRS tax forms? Hope this makes sense. Thank you for any help.
Sincerely,
Erika from Twisp, WA
Permalink Submitted by Alan - IRA critic on Sat, 2021-07-24 22:42
I hope you specifically requested a return of your 2021 Roth excess contribution on which the custodian will determine the gain or loss on that contribution and distribute the adjusted amount. So if you received somewhat more or less than 6000, you did this correctly. For example, if you received back 6100, you will owe tax and penalty on the 100 of gains, but not on the 6000. You will get a 1099R for this distribution in January, and the taxable amount will be in Box 2a. That amount goes on line 4b of Form 1040, and the 10% penalty goes directly on one of the 1040 Schedules. You are then treated as if you did not make the excess Roth contribution.