Excess Simple IRA Contribution, rolled and converted
I have a client that made excess contributions to their Simple IRA in 2022.
At the end of 2022, those funds were rolled to an IRA, then immediately converted to a Roth IRA.
Client just discovered there were excess contributions.
The Simple IRA is still open, but doesn’t have enough funds to cover the excess contributions.
How can we fix this?
One thought is that the client can still make 2023 employee contributions (she hasn’t paid herself in 2023 yet) to get enough funds in the account to cover the excess 2022 contributions, then have the excess 2022 contribution amounts withdrawn (provided the custodian cooperates).
Permalink Submitted by Alan - IRA critic on Tue, 2023-09-12 22:59
Yes, good idea since doing so would avoid a failed conversion and excess Roth contribution and the accompanying corrective transaction issues including tax reporting. The type of business entity sponsoring the SIMPLE IRA determines the deadline to remove the excess by the due date and avoid the 10% excise tax on Form 5330 for 2022.