- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Filed 2022 Taxes and am over the ROTH Income Limit
Posted on 4/12/23 at 10:17 am
Posted on 4/12/23 at 10:17 am
I have had a self managed Roth IRA through Vangaurd that I have consistently contributed to monthly. We just did our taxes for 2022 and I realized that our MAGI is over the limit for contributions.
From my understanding that means that all of my 2022 contributions were ineligible and need to be withdrawn, correct? It also reads like I need to withdraw the earnings (and at an early withdrawal penalty
). How do I calculate the earnings on those specific shares and the dividends that are associated?
Or am I overthinking this?
From my understanding that means that all of my 2022 contributions were ineligible and need to be withdrawn, correct? It also reads like I need to withdraw the earnings (and at an early withdrawal penalty
). How do I calculate the earnings on those specific shares and the dividends that are associated? Or am I overthinking this?
9
Posted on 4/12/23 at 10:25 am to Drunken Crawfish
I don't think over investment qualifies as early withdrawal. I know we have had to pull out before and don't remember there being a penalty. The gains in my roth are paid out quarterly, semi, and year end. Shouldn't be too hard to tabulate how your added shares added distributions.
Posted on 4/12/23 at 10:47 am to Drunken Crawfish
You will need to withdraw the contributions and all earnings associated with them otherwise will pay a 6% penalty yoy. You can recharacterize the contributions from roth to traditional but I would encourage you to talk this through with a tax professional.
This post was edited on 4/12/23 at 10:48 am
Posted on 4/12/23 at 11:09 am to Drunken Crawfish
Well, enjoy jail.
So you have an option.
1) Before April 15, pull out the contribution and associated earnings, and pay incone tax on the earnings (plus 10% penalty on the earnings if you are under 59.5)
2) Wait until after April 15th, and pull out only the contribution, but you can leave the earnings in. Instead, you pay a 6% penalty on the contribution you removed. But note, tha 6% penalty repeats each year. So, keep that in mind.
So you need to run the numbers both ways and see what works best for you.
For the first option, there is a forumla on this website that you use to determine the excess contribition earnings.
LINK
So you have an option.
1) Before April 15, pull out the contribution and associated earnings, and pay incone tax on the earnings (plus 10% penalty on the earnings if you are under 59.5)
2) Wait until after April 15th, and pull out only the contribution, but you can leave the earnings in. Instead, you pay a 6% penalty on the contribution you removed. But note, tha 6% penalty repeats each year. So, keep that in mind.
So you need to run the numbers both ways and see what works best for you.
For the first option, there is a forumla on this website that you use to determine the excess contribition earnings.
LINK
Posted on 4/12/23 at 12:31 pm to LSUFanHouston
The MAGI limit for married filing jointly (assuming you are married) is $218K, but you can still contribute a reduced amount if you are under $228K. It's a small cushion in case you underestimated your MAGI to start the tax year.
I'm getting very close to the limit so I started researching the new requirements this past year.
ETA - if you're close to the limit, one trick is to wait until early in the next tax year so that you can get better visibility to your actual MAGI, and then contribute at that point if you are able to. We just made our 2022 contributions last week.
I'm getting very close to the limit so I started researching the new requirements this past year.
ETA - if you're close to the limit, one trick is to wait until early in the next tax year so that you can get better visibility to your actual MAGI, and then contribute at that point if you are able to. We just made our 2022 contributions last week.
This post was edited on 4/12/23 at 12:34 pm
Posted on 4/12/23 at 12:57 pm to Drunken Crawfish
One thing you can do if you want---roll any traditional IRA into the Roth. You will pay taxes on it but once it is in the Roth it will grow tax free which you know. The good thing is there are no forced distributions from Roth and I think of mine as an estate tool.
I contribute to my traditional IRA since income limits do not apply and then ever year or two I simply roll that money into my Roth.
I contribute to my traditional IRA since income limits do not apply and then ever year or two I simply roll that money into my Roth.
Posted on 4/12/23 at 12:58 pm to Drunken Crawfish
Just do a backdoor Roth if you think you'll be anywhere close to the income limit.
Posted on 4/12/23 at 1:16 pm to skewbs
quote:
The MAGI limit for married filing jointly (assuming you are married) is $218K,
So I am in a similar situation, but we did not come to this point until late in 2022.
Does this only matter when you start the tax year or do I need to go back and factor in contributions from the moment our salary increased in 2022?
Posted on 4/12/23 at 1:46 pm to someLSUdoosh
quote:
So I am in a similar situation, but we did not come to this point until late in 2022.
Does this only matter when you start the tax year or do I need to go back and factor in contributions from the moment our salary increased in 2022?
If you finished the 2022 tax year with more income than what Roth allows, and you contributed to Roth during the year at any time, you are in violation of federal law. It doesn't matter when that income finally went over the limit. It's not a month to month thing. It is calculated annually. Most brokerages will help you fix it but you have to call them. None of them have a button you can click to fix it, and the chatbots can't fix it either. You need to set aside an hour to get on the phone with them.
Posted on 4/12/23 at 2:37 pm to deeprig9
quote:
Most brokerages will help you fix it but you have to call them.
844-992-0342 - Vangaurd's number for anyone that is curious.
ETA: Took 30 minutes.
This post was edited on 4/12/23 at 2:59 pm
Posted on 4/12/23 at 2:57 pm to skewbs
quote:way Way WAY too low for married joint filing , should be $500k, but oh well, way she goes.
The MAGI limit for married filing jointly (assuming you are married) is $218K,
Posted on 4/12/23 at 3:44 pm to Drunken Crawfish
quote:Had to do this last year. Now I always backdoor the Roth so I don’t have to ever go back.
Vangaurd's number for anyone that is curious. ETA: Took 30 minutes.
Posted on 4/13/23 at 3:31 pm to Drunken Crawfish
This happened to me the first year we found ourselves over the limit. I always dumped the full year amount into the Roth in January. A couple things happened and by July I realized we were over the limit. I contacted both etrade and american century and told them the problem. They basically counted all the funds plus, interest, and increase in price and returned the money. It was very easy they deal with this all the time. Filed my taxes as normal and never heard anything about it since.
Posted on 4/13/23 at 4:15 pm to Drunken Crawfish
I wish I was rich enough for a Roth ira
Posted on 4/13/23 at 10:55 pm to el Gaucho
quote:
I wish I was rich enough for a Roth ira
Minimum income is like $10k. Most people around here make too much to qualify for a Roth.
Posted on 4/14/23 at 7:12 am to Drunken Crawfish
Welcome to the back door club. The misses will thank you later.
Posted on 4/14/23 at 7:35 am to Drizzt
quote:
Welcome to the back door club. The misses will thank you later.
I’ve been back dooring it for years
This post was edited on 4/14/23 at 7:36 am
Posted on 4/16/23 at 10:00 am to Drunken Crawfish
Ain’t it great how one can make an honest mistake, and the IRS then accuses you of trying to cheat and forced a penalty practically at gunpoint?
Yet they aren’t held to the same standard. Not even close.
Yet they aren’t held to the same standard. Not even close.
Page 1 of 1
Popular
Back to top
Follow TigerDroppings for LSU Football News