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Excess Contribution for 2021 traditional 401

Forum|Forum|4 years ago
March 18, 2022
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Hi,

I'm 54 and contributed $7,000 to my Traditional IRA, a rollover from a previous job some years ago. I did take a distribution earlier in the year of $29,000. My Income and Adjustments and Total tax are greater than $7,000.

I am trying to figure out why I can only deduct $482 of the contribution and $6,518 is considered an excess contribution and being taxed. Never mind that TT states the penalty tax will be assessed each year the money remains in the IRA. What am I missing or doing wrong?

This makes no sense to me. Thank you.

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Best answer by ThomasM125

The most likely reason the IRA deduction would be denied is that you don't have sufficient earned income. You say you have income greater that $7,000 but that income would have to come from wages or self-employment. If it was from pensions, interest/dividends, investment sales, rental properties, etc... it would not qualify as earned income.

T

ThomasM125Answer

The most likely reason the IRA deduction would be denied is that you don't have sufficient earned income. You say you have income greater that $7,000 but that income would have to come from wages or self-employment. If it was from pensions, interest/dividends, investment sales, rental properties, etc... it would not qualify as earned income.

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