Re: Any tax guys here? Roth question
[Re: AndyF]
#3211328
02/06/24 10:30 PM
02/06/24 10:30 PM
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Joined: Dec 2007
Posts: 19,908
Puttin' on the foil in Charles...
not_a_charger
Mr. Big Shot Moparts Moderator
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Mr. Big Shot Moparts Moderator
Joined: Dec 2007
Posts: 19,908
Puttin' on the foil in Charles...
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Roth gains are taxable if you make a withdrawal prior to retirement age. Contributions can always been withdrawn tax free, since they are post-tax contributions to begin with.
OP, they should've only refunded your contributions, not any gains at all. I believe the form you need is 8606. It allows you to enter your cost basis (your contributions) and your withdrawal amount. Since your withdrawal will be less than your cost basis, you'll owe $0 taxes on that $ once you complete the correct form. Your tax program will have the form, but you'll likely have to search for it, it probably will not prompt you to fill it out on it's own.
Earning every penny of that moderator paycheck.
DBAP
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Re: Any tax guys here? Roth question
[Re: not_a_charger]
#3211364
02/07/24 03:34 AM
02/07/24 03:34 AM
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Joined: Feb 2015
Posts: 2,075
CA
crackedback
top fuel
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top fuel
Joined: Feb 2015
Posts: 2,075
CA
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Roth gains are taxable if you make a withdrawal prior to retirement age. Contributions can always been withdrawn tax free, since they are post-tax contributions to begin with.
OP, they should've only refunded your contributions, not any gains at all. I believe the form you need is 8606. It allows you to enter your cost basis (your contributions) and your withdrawal amount. Since your withdrawal will be less than your cost basis, you'll owe $0 taxes on that $ once you complete the correct form. Your tax program will have the form, but you'll likely have to search for it, it probably will not prompt you to fill it out on it's own. Close. He has to take out the gain attributable to the excess contribution. It's a simple calculation and doing so SHOULD NOT put you into a perpetual loop. You take out the two pieces, apply any tax, done. If you take additional funds out of your ROTH to cover, put that can of worms back on the shelf. Deal with the tax liability out of your current bank accounts and not any retirement accounts. JMO You will get hit with a tax liability and 10% penalty on any gain. You can also leave the excess in the account, use the excess as part of your 2024 contributions, reduce your actual $ into the account by prior year overage. 7000 limit, 1000 overage, 6000 contribution in 2024. There is a 6% excise tax on any excess contributions. Have to crunch some numbers to see which method is most favorable. This has a pretty decent explanation... https://www.fool.com/retirement/plans/roth-ira/excess-contribution/
Last edited by crackedback; 02/07/24 03:39 AM.
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Re: Any tax guys here? Roth question
[Re: crackedback]
#3211438
02/07/24 11:34 AM
02/07/24 11:34 AM
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Joined: Jan 2003
Posts: 10,715
North Dakota
6PakBee
I Live Here
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I Live Here
Joined: Jan 2003
Posts: 10,715
North Dakota
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Enlist the help of a tax professional. Roth's are a swamp.
"We live in a time when intelligent people are being silenced so that stupid people won't be offended".
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Re: Any tax guys here? Roth question
[Re: 6PakBee]
#3211491
02/07/24 01:45 PM
02/07/24 01:45 PM
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Joined: Feb 2014
Posts: 1,707
central il.
second 70
top fuel
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top fuel
Joined: Feb 2014
Posts: 1,707
central il.
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I was just looking at the 5 year rule last month and was surprised to see that if you add a roth conversion to a roth that's been open for over 5 years and you're over 591/2 the amount you convert has it's own new 5 year rule for each conversion you make. If you take the principle out before the 5 years you'll owe a 10% penalty. They use Jan. 1 as the start date for the year you convert so if you do it Dec. 31 it's only 4 years 1 day. https://www.investopedia.com/roth-ira-conversion-rules-4770480 See beware of 5 year rule.
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Re: Any tax guys here? Roth question
[Re: not_a_charger]
#3211801
02/08/24 12:01 AM
02/08/24 12:01 AM
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Joined: Jan 2003
Posts: 31,034
Oregon
AndyF
I Win
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I Win
Joined: Jan 2003
Posts: 31,034
Oregon
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Roth gains are taxable if you make a withdrawal prior to retirement age. Contributions can always been withdrawn tax free, since they are post-tax contributions to begin with.
OP, they should've only refunded your contributions, not any gains at all. I believe the form you need is 8606. It allows you to enter your cost basis (your contributions) and your withdrawal amount. Since your withdrawal will be less than your cost basis, you'll owe $0 taxes on that $ once you complete the correct form. Your tax program will have the form, but you'll likely have to search for it, it probably will not prompt you to fill it out on it's own. Yeah I suppose you're correct on that. I'm past retirement age so my frame of reference has changed! I'm pretty sure this is all a tempest in a teapot. The OP didn't say what the ill gotten gains amounted to but I bet it was less than $100. If was me I'd just leave it in the account and not worry about it. I doubt the IRS is going to fire up the black helicopters for less than $100.
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Re: Any tax guys here? Roth question
[Re: AndyF]
#3211811
02/08/24 01:09 AM
02/08/24 01:09 AM
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Joined: Feb 2003
Posts: 10,210
Someplace you aren't
SomeCarGuy
I Live Here
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I Live Here
Joined: Feb 2003
Posts: 10,210
Someplace you aren't
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Yeah how much is this? My cpa has said many years in a row to not fool with the corrections to my taxable account because it’s not worth it. They send some every year way past when I file. Some bs about recharacterizing some gains. He said just cut a check if the irs makes it an issue. We aren’t taking about thousands though. It’s never been made an issue.
I want my fair share
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Re: Any tax guys here? Roth question
[Re: crackedback]
#3211907
02/08/24 11:05 AM
02/08/24 11:05 AM
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Joined: May 2005
Posts: 4,727
Florida
BDW
OP
master
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OP
master
Joined: May 2005
Posts: 4,727
Florida
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Roth gains are taxable if you make a withdrawal prior to retirement age. Contributions can always been withdrawn tax free, since they are post-tax contributions to begin with.
OP, they should've only refunded your contributions, not any gains at all. I believe the form you need is 8606. It allows you to enter your cost basis (your contributions) and your withdrawal amount. Since your withdrawal will be less than your cost basis, you'll owe $0 taxes on that $ once you complete the correct form. Your tax program will have the form, but you'll likely have to search for it, it probably will not prompt you to fill it out on it's own. Close. He has to take out the gain attributable to the excess contribution. It's a simple calculation and doing so SHOULD NOT put you into a perpetual loop. You take out the two pieces, apply any tax, done. If you take additional funds out of your ROTH to cover, put that can of worms back on the shelf. Deal with the tax liability out of your current bank accounts and not any retirement accounts. JMO You will get hit with a tax liability and 10% penalty on any gain. You can also leave the excess in the account, use the excess as part of your 2024 contributions, reduce your actual $ into the account by prior year overage. 7000 limit, 1000 overage, 6000 contribution in 2024. There is a 6% excise tax on any excess contributions. Have to crunch some numbers to see which method is most favorable. This has a pretty decent explanation... https://www.fool.com/retirement/plans/roth-ira/excess-contribution/ This helped, thx! It's not a big tax delta, the "gain" on the excess contribution is $800, so the tax would be $200. The issue is Roth contribution limits are on a sliding scale based on AGI, so the extra $800 would make my AGI higher, further reducing the Roth contribution limit, and making the excess amount larger, throwing the whole calculation into another excessive withdrawal. Vanguard finally replied that since the withdrawal is in 2024, they will report the "gain" next year for the 2024 tax year. Appreciate all the input, all this seems unnecessarily complicated. Wouldn't be cost effective to pay a tax professional over $200.
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