Roth IRA Excess Contributions
Hello!
If in 2022 an individual contributes more than they earned in 2022, there are excess contributions, correct? If the Roth contribution amount has had a loss of value since it was contributed. In order to not pay the excess contribution penalty tax, does the individual take out the full contributed amount, or the contribution amount minus the losses relating to the contributed amount?
Thank you for you help!
Permalink Submitted by Alan - IRA critic on Mon, 2023-03-06 23:30
The amount of the excess contribution is provided to the Roth custodian, most of which will calculate the net earnings attributable to the excess amount. If a loss, then the individual receives back less than the excess amount and therefore there will be no earnings subject to tax. The deadline to complete the corrective distribution is 10/16/2023 if the return or an extension is filed by 4/18/2023. In addition, an explanatory statement regarding the removal of excess should be included with the 2022 return.