Advice on excess 2019 contributions to Roth IRA

[Account Closed]

Hello all.

As I was preparing my tax returns, I realized my 2019 AGI exceeds the IRS income limits for full contributions to a Roth IRA, which carries a 6% penalty for every year the excess along with its corresponding return are left in the account. From what I have read so far, it is my understanding that I can remove this excess before April 15 to avoid all penalties.

However, what is not so clear to me are the options I may have after removing the money from the IRA and potential consequences of each option, such as early-withdrawal penalties, additional tax liability, etc. It is also not clear to me how to calculate and segregate the earnings/losses attributable only to the contributions made within 2019.

Appreciate any advice I can get on this.  Also, appreciate any referrals to a good CPA around the Tampa Bay area with whom I may be able to consult on this.

Thank you in advance.  Look forward to this discussion.

[Scott Jensen]

@Account Closed Call the custodian and let them know you recharacterize excess contributions because you were over the AGI limit. There are two options. 1. They send you the funds or 2. you can have the 2019 contribution changed to a 2020 contribution if you have not made one already and think you will be under the AGI limit this year. There are no penalties as long as you do this before the tax filing deadline. If there were gains in the account you will have to pay tax on the gain attributable to the excess contribution. It is generally pretty minimal.

The calculations for a return of excess listed in IRS speak on page 29-30 of IRS Publication 590.  Enjoy the read and let me know if you have any questions!

https://www.irs.gov/pub/irs-pdf/p590a.pdf