Excess Roth Contribution With Loss
I have a client, age 28, who is single and made a Roth contribution early last year for $6000 on 1/31/22. Her income wound up substantially more than what she anticipated and now she needs to remove the entire amount. Her total account was down 13.95% from 1/31/22 to 12/31/22. On the $6000 this works out to $837.03. Am I correct in that she only needs to withdraw the difference of $5162.97?
Permalink Submitted by Alan - IRA critic on Tue, 2023-01-10 00:19
Assuming that this was a 2022 and not a 2021 contribution, your math is correct. However, most IRA custodians use software to determine the net income or loss applicable to the specific contribution and will not accept the client’s figure. A few will ask the client to provide them with the calculated amount to return. Once this is processed and if client has no TIRA balance, she could still make a new 2022 non deductible TIRA contribution of 6000 and convert it tax free to a Roth IRA (back door Roth strategy).