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Removal of excess Roth after filing date

Forum|Forum|4 years ago
November 5, 2021
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I missed including a $300 Traditional IRA on my 2020 tax return and I maxed out my Roth contribution to $6000 so this resulted in an excess contribution of $300 that has to be removed from my Roth for 2020. I had Vanguard return my $300 in excess 2020 Roth contributions after Oct 15, 2021. I know I owe the 6% penalty on the $300 returned to me. I will amend the 2020 tax return this Nov to correct the 8606 to show the $300 in traditional IRA contributions and file 5329. Since Vanguard left the gains in the Roth account (IAW Pub 590) how do I account for these gains? Do I show them as part of my 2021 Roth contributions? However, don't I owe tax on the gains to be considered part of my 2021 contribution? Since I am under 59 1/2 do I owe any 10% penalty?

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Best answer by fanfare

@skitax7

I withdraw my prior answer since I see now that you waited until after Oct 15, the due date including extensions.

Regarding the earnings, there is nothing to report. They just silently become a part of your Roth IRA.

You pay the 6% penalty on an excess of $300.

fanfare

Employee

{answer out]

fanfareAnswer

Employee

@skitax7

I withdraw my prior answer since I see now that you waited until after Oct 15, the due date including extensions.

Regarding the earnings, there is nothing to report. They just silently become a part of your Roth IRA.

You pay the 6% penalty on an excess of $300.

S

skitax7Author

Thanks for the updated response. I have been going crazy looking for some clarification to leaving the gain in the Roth. The IRS Pub 590-B says to leave the gain in the ROTH. Likewise Vanguard says they will not calculate the gain. Seems strange that the IRS would let me leave the gain in the Roth. I see the gain as an untaxed contribution. Calculation of the gain would be a challenge.