Has anyone run into an issue when adding your Roth IRA contributions? I didn't contribute anywhere near the yearly max, it is saying my income is too high to contribute.

Forum|Forum|1 year ago
February 12, 2025
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fanfare

Employee

Even one dollar ( $1 ) will be an excess if your 2024 income is above the limit for Rith IRA contribution.

In that case it must be removed

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return of excess contribution:

before tax filing date including extension: positive earnings allocable to the excess are included in income on 1040 Line 4b for the year of the contribution. negative earnings are ignored; in any case, for purposes of basis, consider the original contribution amount as returned.
["Include the earnings in income for the year in which you made the contributions, not the year in
which you withdraw them."]

You must have a) filed by tax day, or b) requested an extension of time to file by tax day to take advantage of the Oct 15 deadline.

@jena-strength

Consult your custodian to obtain the correct removal form for "excess plus earnings".

fanfare

Employee

OR recharacterized.

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recharacterization: the original amount to the first IRA you report as contribution to the second IRA, earnings move but that is ignored.
You must use a trustee-to-trustee transfer before the due date April 15,2025 ( or Oct 15, 2025 if 1040 was timely filed or extended).
You will instruct trustee to calculate the allocable earnings.

report this on your tax return for the year during which the contribution was made.
Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA.
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Upon reporting a Trad IRA contribution (non-deductible) on your tax return, you can then also report a Roth conversion of the contributed amount for net tax of zero, unless your IRA already had a basis.

In that case, it can't be done tax free.

@jena-strength