11th Hour - Roth IRA Over Contributed for 2018

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dlong
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11th Hour - Roth IRA Over Contributed for 2018

Post by dlong » Sun Apr 14, 2019 3:05 am

So, it's the 11th hour (4 AM, Sunday, 04/14/2019) for 2018 Taxes. I run through the ez-Q&A clicks with H&R Block tax software. Apparently both my wife and I over-contributed by $40 each for a total of $80.

:oops:

  • As I understand it... I can't buy/sell funds during the weekend. Taxes are due Monday, midnight. So, I could request a withdraw of the excess and it will be completed COB on Monday (04/15/2019) and then file taxes in the evening?? :?: Or is it too late and I have to file for an extension since I won't get an amended form from Vanguard?. :?:
  • Will Vanguard help me figure out the interest earned on the $80? :?:
  • I see references to form 5329. When do I need to file 5329? :confused
We both have multiple tIRA and RothIRA accounts.

It's way too late and I got a headache... my own darn fault for procrastinating. Anyway, any help in simple terms would be appropriated it. Thanks in advance!

Peace,

-d

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whodidntante
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Re: 11th Hour - Roth IRA Over Contributed for 2018

Post by whodidntante » Sun Apr 14, 2019 5:51 am

Filing an extension is really easy. There is no reason to avoid that if you need more time.

Can the 2018 overcontribution be applied to 2019?

Did the overcontribution occur due to income based phase out? If so, you should do a backdoor Roth going forward, if you can roll the pretax amounts into a 401k.

Bacchus01
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Re: 11th Hour - Roth IRA Over Contributed for 2018

Post by Bacchus01 » Sun Apr 14, 2019 6:26 am

You can’t just sell the funds and be okay. You have to reverse the contribution. That takes a form for Vanguard and you have to mail it in. Yeah, the old snail mail.

Ask me how I know.

You’ll need to file and extension.

Katietsu
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Re: 11th Hour - Roth IRA Over Contributed for 2018

Post by Katietsu » Sun Apr 14, 2019 9:30 am

File the extension. This will give you until October 15 to remove the excess contribution.

Yes, Vanguard will calculate the earning associated earnings.

Do you know if there is a gain or loss? The possible difficulty here is that if you have a gain, that gain is added to your 2018 taxable income. If your excess contribution is because of too high of an income, the extra earnings will make more of your contribution fall into the excess category. Then you will need to withdraw more excess contributions.

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dlong
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Re: 11th Hour - Roth IRA Over Contributed for 2018

Post by dlong » Sun Apr 14, 2019 8:04 pm

whodidntante wrote:
Sun Apr 14, 2019 5:51 am
Filing an extension is really easy. There is no reason to avoid that if you need more time.

Can the 2018 overcontribution be applied to 2019?

Did the overcontribution occur due to income based phase out? If so, you should do a backdoor Roth going forward, if you can roll the pretax amounts into a 401k.
Katietsu wrote:
Sun Apr 14, 2019 9:30 am
File the extension. This will give you until October 15 to remove the excess contribution.

Yes, Vanguard will calculate the earning associated earnings.

Do you know if there is a gain or loss? The possible difficulty here is that if you have a gain, that gain is added to your 2018 taxable income. If your excess contribution is because of too high of an income, the extra earnings will make more of your contribution fall into the excess category. Then you will need to withdraw more excess contributions.
Bacchus01 wrote:
Sun Apr 14, 2019 6:26 am
You can’t just sell the funds and be okay. You have to reverse the contribution. That takes a form for Vanguard and you have to mail it in. Yeah, the old snail mail.

Ask me how I know.

You’ll need to file and extension.
Extension: Thanks all. I will have filed the extension. H&R block D/Led S/W wanted $20 to file just the extension! SO I ended getting done via TurboTax online for free.

Calculating associated earnings, gain or Loss: I do not know if it is a gain or loss but am very happy that Vanguard will calculate it for me.

Excess Contribution: Yes, I think, the over contribution is due to income phase out. Gross, combined we make ~ $180 - $190, which is why I think we are each only $40 over. We each put in $5,500 according to vanguard.

Although now for the life of me, I can't get H&R block s/w to bring me back the warning where it states that we both over contributed.

Looking at our numbers, our mAGI is the same as our AGI, which is just below the $189,000, at $188,103. We both also have 401k at work and contribute the maximum ($18,500) to it as well. I also do a mega backdoor roth ira with an additional $20k or so.
  • Unless our mAGI is not the same as our AGI. Does it seems like we are over contributed?

Katietsu
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Re: 11th Hour - Roth IRA Over Contributed for 2018

Post by Katietsu » Sun Apr 14, 2019 11:19 pm

Take a look at IRS Pub 590-A.

Is it possible that you received the warning before all relevant information was entered? And it no longer applies?

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dlong
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Re: 11th Hour - Roth IRA Over Contributed for 2018

Post by dlong » Tue Apr 16, 2019 12:03 am

Katietsu wrote:
Sun Apr 14, 2019 11:19 pm
Take a look at IRS Pub 590-A.

Is it possible that you received the warning before all relevant information was entered? And it no longer applies?
I suppose anything IS possible. I/we don't know what calculation H&R Block SW did to trigger the the over $40 contribution warning for each one of us. Except that the warning seemed to come at almost the very end, so I do not think there was any additional data being added other than answering interview questions (no numbers added). UNLESS the software didn't calculate dependent care (entered at the beginning) and/or ensuring that we have health care for the entire year, until towards the end of the 'interview' because I think those would be the only relevant 'deduction'.
Last edited by dlong on Tue Apr 16, 2019 12:25 am, edited 1 time in total.

mhalley
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Re: 11th Hour - Roth IRA Over Contributed for 2018

Post by mhalley » Tue Apr 16, 2019 12:11 am

Since it is such a small amount, maybe you could just pay the excess tax and carry forward the 40 bucks.
. Carry forward—You can offset the excess contribution by limiting your annual contribution for the following year to the maximum minus the excess, as long as you qualify to make a contribution. No distribution from your IRA will occur. For example, if your contribution limit is $5,500 and you exceed it by $1,500, you can offset the excess by limiting your contributions to $4,000 the following year. However, if you use the carry forward method, you are subject to the IRS 6% excise tax because you did not correct the excess by the deadline. You will not owe tax and, if you are under 591⁄2, the IRS 10% early distribution penalty on any earnings. You will not be able to recharacterize the carry forward amount to the other type of IRA. For example, if the carry forward amount is in a Traditional IRA, you cannot recharacterize that amount as a Roth IRA contribution.
Unless you already put in this year’s contribution.
https://www08.wellsfargomedia.com/asset ... utions.pdf

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