Can I withdraw 2022 Roth IRA Contribution after April 18, 2023 (CA Tax Return due 10/16/2023)?

[fred2017]

Hello Bogleheads:

Have my last question on my 2022 tax return (not found my CPA and doing by myself):

My wife and I both contributed Roth IRA of $6000 (total $12,000) in early 2022 and we are over the income limit for Roth IRA contribution.
I just found this issue while filing my tax return now, CA tax return is not due until Oct. 16, 2023.

IRA website says
"If you exceed the 2022 IRA contribution limit, you may withdraw excess contributions from your account by the due date of your tax return (including extensions). Otherwise, you must pay a 6% tax each year on the excess amounts left in your account."

So I think for tax return filers in CA, we have due date of 10/16/2023 to withdraw the excess Roth IRA contribution. Is this correct?

But my TurboTax says - I can withdraw before 04/18/2023 (or 10/16/2023 if I am filing an extension). Is this a statement for general situation in Turbotax? Should Turbotax recognize that I am CA and should provide statement specific to me?

Thanks again !

[retiredjg]

Your CA due date does not change anything about your federal return that I know of.

Did you file your federal return on time? If not, did you file for an extension by the due date?

Are you sure you want to withdraw your contribution rather than re-characterize it to traditional IRA?

[toddthebod]

Hello Bogleheads:

Have my last question on my 2022 tax return (not found my CPA and doing by myself):

My wife and I both contributed Roth IRA of $6000 (total $12,000) in early 2022 and we are over the income limit for Roth IRA contribution.
I just found this issue while filing my tax return now, CA tax return is not due until Oct. 16, 2023.

IRA website says
"If you exceed the 2022 IRA contribution limit, you may withdraw excess contributions from your account by the due date of your tax return (including extensions). Otherwise, you must pay a 6% tax each year on the excess amounts left in your account."

So I think for tax return filers in CA, we have due date of 10/16/2023 to withdraw the excess Roth IRA contribution. Is this correct?

But my TurboTax says - I can withdraw before 04/18/2023 (or 10/16/2023 if I am filing an extension). Is this a statement for general situation in Turbotax? Should Turbotax recognize that I am CA and should provide statement specific to me?

Thanks again !

https://www.law.cornell.edu/cfr/text/26/301.7508A-1

(c) Acts for which a period may be disregarded—(1) Acts performed by taxpayers. Paragraph (b) of this section applies to the following acts performed by affected taxpayers (as defined in paragraph (d)(1) of this section)—

<snip>

(iii) Making contributions to a qualified retirement plan (within the meaning of section 4974(c)) under section 219(f)(3), 404(a)(6), 404(h)(1)(B), or 404(m)(2); making distributions under section 408(d)(4); recharacterizing contributions under section 408A(d)(6); or making a rollover under section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3);

[toddthebod]

Your CA due date does not change anything about your federal return that I know of.

Did you file your federal return on time? If not, did you file for an extension by the due date?

Are you sure you want to withdraw your contribution rather than re-characterize it to traditional IRA?

I assume he is misspeaking, and he means a Federal tax return due for a resident of California who has their due date extended due to the Federal disaster declaration, in which case the deadline to return contributions or recharacterize were extended as well.

[retiredjg]

Your CA due date does not change anything about your federal return that I know of.

Did you file your federal return on time? If not, did you file for an extension by the due date?

Are you sure you want to withdraw your contribution rather than re-characterize it to traditional IRA?

I assume he is misspeaking, and he means a Federal tax return due for a resident of California who has their due date extended due to the Federal disaster declaration, in which case the deadline to return contributions or recharacterize were extended as well.

So a person affected by a federal disaster declaration could get an extension for federal taxes without filing for an extension?

[toddthebod]

Your CA due date does not change anything about your federal return that I know of.

Did you file your federal return on time? If not, did you file for an extension by the due date?

Are you sure you want to withdraw your contribution rather than re-characterize it to traditional IRA?

I assume he is misspeaking, and he means a Federal tax return due for a resident of California who has their due date extended due to the Federal disaster declaration, in which case the deadline to return contributions or recharacterize were extended as well.

So a person affected by a federal disaster declaration could get an extension for federal taxes without filing for an extension?

Pretty much.
https://www.irs.gov/newsroom/tax-relief ... situations

[bogleschwabber]

I thought you could take out Roth IRA contributions anytime you want without paying tax or penalty. If it’s in the Roth that means you already paid taxes for that dollar. No?

[retiredjg]

Ok. That makes sense.

Fred, check out Publication 590a, starting on page 42. If you were not in a disaster area and did file your taxes on time or an extension on time, you could have until October 18 to withdraw your contributions and their associated earnings. The earnings are taxable on your 2022 return (because you made the contribution in 2022).

Since you are in a disaster area, it appears you the requirement to file on time or file an extension on time is waived. But you can still withdraw your contributions (and pay taxes on the earnings).

My guess is that TT will ask you at some point if you filed the extension or if you were in a disaster area and then handle it properly. But that is only a guess. I've seen such questions in TT in the past.


Having said all that, the question is still...do you want to withdraw or re-characterize to traditional IRA? If you have no other traditional IRAs (including SEP IRA, SIMPLE IRA, rollover IRA) you could recharacterize to traditional IRA and then do a Roth conversion. (The "backdoor Roth process.")

[toddthebod]

I thought you could take out Roth IRA contributions anytime you want without paying tax or penalty. If it’s in the Roth that means you already paid taxes for that dollar. No?

He will be penalized for making an ineligible contribution if he does not remove excess contributions prior to the tax deadline.

[retiredjg]

I thought you could take out Roth IRA contributions anytime you want without paying tax or penalty. If it’s in the Roth that means you already paid taxes for that dollar. No?

You can take out contributions that you were eligible to make. If you were not eligible to make the contribution in the first place, you must have the custodian remove it or withdraw it as if you never made the contribution in the first place.

The difference? How it is coded on the 1099. One is a withdrawal. One is a do-over.

[fred2017]

Having said all that, the question is still...do you want to withdraw or re-characterize to traditional IRA? If you have no other traditional IRAs (including SEP IRA, SIMPLE IRA, rollover IRA) you could recharacterize to traditional IRA and then do a Roth conversion. (The "backdoor Roth process.")

Thank you - I will check that option. We both have traditional IRA.
This will be similar to the situation we had in 2021 tax return (my wife's Roth IRA contribution was recharacterized contribution to traditional IRA, and then she received 2022 Form 1099-R that we need to entry into this year's tax return). As for backdoor Roth process, I still need to learn how to do it (was trying to learn the process for years).
Thanks so much !

[Silk McCue]

Thank you - I will check that option. We both have traditional IRA.
This will be similar to the situation we had in 2021 tax return (my wife's Roth IRA contribution was recharacterized contribution to traditional IRA, and then she received 2022 Form 1099-R that we need to entry into this year's tax return). As for backdoor Roth process, I still need to learn how to do it (was trying to learn the process for years).
Thanks so much !

It shouldn’t take much time at all to figure out Backdoor Roth as we have a wiki for your reading pleasure and innumerable individuals here that can answer any questions once you study the Wiki.

https://www.bogleheads.org/wiki/Backdoor_Roth

Cheers

[fred2017]

It shouldn’t take much time at all to figure out Backdoor Roth as we have a wiki for your reading pleasure and innumerable individuals here that can answer any questions once you study the Wiki.

https://www.bogleheads.org/wiki/Backdoor_Roth

Cheers

Thank you so much.

Seems that we did a non-wise choice during 2021 tax return.

When my wife's $6000 Roth IRA contribution was recharacterized into Traditional IRA, the $6000 was deducted from Form 1040 (line 10, which was from Schedule 1, Line 26 (Line 20) IRA deduction), and Form 1040, Line 4a IRA distributions added "STMT".
$6000 was after tax money, and the associated tax was more than the income of $6000. But with above selection, we only get tax back from income of $6000.

Also assume it was not a nondeductible contribution.

Thanks again !

[retiredjg]

Something is not making sense. If her 2021 contribution was deductible (according to turbotax), why did she re-characterize from Roth to traditional?

I have to admit I have no idea what part of your last post means.

No matter what the answer is to that, the presence of that tIRA will interfere with her using the backdoor Roth process....so she might as well have the custodian remove/return her 2022 Roth IRA contribution.

If you have an IRA too, you should probably have them remove yours too.

Remember they will return the contribution and associated earnings and those earnings are taxable income on your 2022 return.

[fred2017]

No matter what the answer is to that, the presence of that tIRA will interfere with her using the backdoor Roth process....so she might as well have the custodian remove/return her 2022 Roth IRA contribution.

If you have an IRA too, you should probably have them remove yours too.

Remember they will return the contribution and associated earnings and those earnings are taxable income on your 2022 return.

It will be a little pain to withdraw the Roth contribution if there is earnings. I remembered that I had to withdraw Roth contribution in my 2019 tax return due to over the income limit, and there was earning. At the time, Vanguard was unable to provide all detailed information, so once I received the associated tax form from Vanguard at a later time, I had to amend my 2019 tax return.

I think both of us had loss (no earnings) for the 2022 Roth contribution, probably we don't have to amend 2022 tax return at a later time (as we don't owe taxes to Federal/State). If there are earnings, I am going to ask Vanguard to withhold them all as Federal/State taxes, so I don't owe tax to Federal/State return, trying to avoid the need to amend 2022 tax return at a later time. Not sure if this strategy is workable.

Thanks.

[retiredjg]

One thing you might want to change....contributing to Roth IRA before you know for sure what your income is going to be. You seem to have gotten on the wrong side of that decision more than once.

[Artsdoctor]

One thing you might want to change....contributing to Roth IRA before you know for sure what your income is going to be. You seem to have gotten on the wrong side of that decision more than once.

I agree with you: I wouldn't want the hassle of re-characterization so I'd wait until the end of the year. However, one can certainly make a Roth IRA contribution (not conversion) first and ask questions later. Vanguard has a nice summary here:

https://investor.vanguard.com/investor- ... terization

Regarding disasters, yes. Most counties in CA were granted disaster status in January-February so everything (tax deadlines of all sorts) was moved to October, including estimated tax payments. Furthermore, all of the clean-up mess on your property can be deducted from your taxes. There's a specific FEMA number you can use. Given the state of climate-related issues around the county, this is an important tax reminder for many.