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Investing too much money in my Roth - what happens?

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BrianJone
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Investing too much money in my Roth - what happens?  Reply with quote  

I was told that there is no penalty for investing an improper amount into a Roth IRA as long as its corrected the following year. The way it was explained to me: if I invest $1,000 in a 2013 Roth today but learn from my taxes that I didn't meet the minimum requirement for a Roth, I must remove the $1,000 plus interst and also must pay taxes on any interest that $1,000 earned. If I invest that same $1,000 today but make too much and exceed the maximum requirement for a Roth, I can just move this $1,000 to a traditional IRA or other retirement account. Either option would be done without penalty (though tax may be owed on interst earned).

Can anyone tell me if this is accurate information?

I will likely (98% chance) qualify between the minimum and maximum for a Roth. But I want to have all the facts incase my income changes drastically this year. Please offer any helpful information you can. Thanks
Post Thu Apr 11, 2013 9:11 pm
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clydewolf
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Re: Investing too much money in my Roth - what happens?  Reply with quote  

quote:
Originally posted by BrianJone
I was told that there is no penalty for investing an improper amount into a Roth IRA as long as its corrected the following year. The way it was explained to me: if I invest $1,000 in a 2013 Roth today but learn from my taxes that I didn't meet the minimum requirement for a Roth, I must remove the $1,000 plus interst and also must pay taxes on any interest that $1,000 earned. If I invest that same $1,000 today but make too much and exceed the maximum requirement for a Roth, I can just move this $1,000 to a traditional IRA or other retirement account. Either option would be done without penalty (though tax may be owed on interst earned).

Can anyone tell me if this is accurate information?

I will likely (98% chance) qualify between the minimum and maximum for a Roth. But I want to have all the facts incase my income changes drastically this year. Please offer any helpful information you can. Thanks

It is possible to contribute too much to any IRA.

First you have your IRA custodian remove the contribution and earnings from the IRA.
You are correct the earnings will be reported as interest on the tax return for the year you received them.
If the excess contribution was for 2012, you report the Non-excess amount on form 8606.
Include a note showing when the excess contribution was made, and when the excess amount was removed from the IRA.
In January 2014 you will receive a 1099-R showing the distribution.
When the 1099-R agrees with your explanation note, you do not need to enter the distribution on your 2013 tax return.

If the over-contribution was for 2012, you can have the custodian move the contribution to a 2013 contribution.

Do you have any Traditional IRAs? Do they hold any after tax money?
Post Fri Apr 12, 2013 12:56 am
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Carmen W
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My advice is that before investing the money in anything we must check out all the latest trends in the market. After having all the best essay writing service uk reviews enough information then decide where to invest the money. Otherwise you have to face some troubles as well.
Post Sun May 20, 2018 7:09 am
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