Excess contributions to IRA

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Topic Author
investor231i
Posts: 107
Joined: Mon Dec 30, 2019 7:56 pm

Excess contributions to IRA

Post by investor231i »

Hello Fellow Bogleheads,

While preparing taxes for this year, I realized that I made contributions to IRA's twice. Generally we contribute to traditional IRA and then convert to ROTH via back-door.

When I checked the records and the tax related forms, I realized that this happened twice last year. This happened as I changed from one brokerage firm to another in the middle of the year. Otherwise the second brokerage firm would not have allowed me to do it.

Now the issue is that I converted those traditional IRA's to ROTH's. So my understanding is that the second contribution is excess contribution and I need to take it out. But it was contributed to traditional and now is in ROTH. So, what would be the exact procedure of taking that out. Also, I doubt that I would be able to do it before the tax filing date. Even if I manage to do that, I won't get any new tax form. Any advice or pointers on this would be helpful. Thanks.
Affable at 50
Posts: 281
Joined: Fri Dec 27, 2019 1:34 am

Re: Excess contributions to IRA

Post by Affable at 50 »

investor231i wrote: Tue May 11, 2021 1:48 pm Hello Fellow Bogleheads,

While preparing taxes for this year, I realized that I made contributions to IRA's twice. Generally we contribute to traditional IRA and then convert to ROTH via back-door.

When I checked the records and the tax related forms, I realized that this happened twice last year. This happened as I changed from one brokerage firm to another in the middle of the year. Otherwise the second brokerage firm would not have allowed me to do it.

Now the issue is that I converted those traditional IRA's to ROTH's. So my understanding is that the second contribution is excess contribution and I need to take it out. But it was contributed to traditional and now is in ROTH. So, what would be the exact procedure of taking that out. Also, I doubt that I would be able to do it before the tax filing date. Even if I manage to do that, I won't get any new tax form. Any advice or pointers on this would be helpful. Thanks.
You should contact the brokerage where you made the second contribution and do this as soon as possible. The administrator will walk you through this. The tax filing date is approaching so you should take this seriously.
Topic Author
investor231i
Posts: 107
Joined: Mon Dec 30, 2019 7:56 pm

Re: Excess contributions to IRA

Post by investor231i »

Thanks for the pointer. I called the brokerage firm. They understood the issue, but the personnel mentioned it is a bit complicated and would need to contact his colleagues on how to do this as the contribution happened to T-IRA, and were moved to ROTH. They would get to me tomorrow on this.
Topic Author
investor231i
Posts: 107
Joined: Mon Dec 30, 2019 7:56 pm

Re: Excess contributions to IRA

Post by investor231i »

I was able to discuss this with the brokerage and submitted the required forms. They mentioned that they are busy; and the reversal would take more than 2 weeks. So, I am not sure how to fill this in the tax returns. I think I will need to file an amendment to the tax returns. Is my understanding correct.
lakpr
Posts: 11613
Joined: Fri Mar 18, 2011 9:59 am

Re: Excess contributions to IRA

Post by lakpr »

investor231i wrote: Thu May 13, 2021 2:40 pm I was able to discuss this with the brokerage and submitted the required forms. They mentioned that they are busy; and the reversal would take more than 2 weeks. So, I am not sure how to fill this in the tax returns. I think I will need to file an amendment to the tax returns. Is my understanding correct.
Have you already filed the tax returns? If so, yes you would need to file an amended tax return later.

If you haven't filed yet, just file for an extension to give yourself another 5 months.
Topic Author
investor231i
Posts: 107
Joined: Mon Dec 30, 2019 7:56 pm

Re: Excess contributions to IRA

Post by investor231i »

lakpr wrote: Fri May 14, 2021 6:57 am
investor231i wrote: Thu May 13, 2021 2:40 pm I was able to discuss this with the brokerage and submitted the required forms. They mentioned that they are busy; and the reversal would take more than 2 weeks. So, I am not sure how to fill this in the tax returns. I think I will need to file an amendment to the tax returns. Is my understanding correct.
Have you already filed the tax returns? If so, yes you would need to file an amended tax return later.

If you haven't filed yet, just file for an extension to give yourself another 5 months.
Thanks for the message. I have not filed the taxes. But there are federal taxes due. So, I was thinking of filing the taxes for now; and pay the federal taxes.

I also called the brokerage firm again. They mentioned that I won't be receiving the corrected 1099R's until early next year. I may only get statements when this is fixed. So, an extension until October may not be helpful as I won't have the 1099 forms then. So, I am planning to file the amended taxes when I get the forms.
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