Do Roth IRA excess contribution removals need to be exact in $ value?

Submitted by mch_2 t3_11dqrzs in personalfinance

I contributed $6k last year, but need to take out approximately $900 + associated losses/gain.

I don't know the exact amount partly because I will ask my tax accountant file my taxes later, and also my W2 is under debate with my ex-employer about an error.

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Can I just pull out $1k if I am pretty my excess is about $900, or am I only allowed to have the exact amount removed?

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DeluxeXL t1_jaa8lxg wrote

What did the Roth IRA provider say when you asked them to remove excess contribution? Usually, the IRA provider does the calculations for net income attributable, not you or your accountant.

Also, have you considered doing a recharacterization instead, if you are going for backdoor Roth?

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mch_2 OP t1_jaa8tuw wrote

I meant I don’t know the $900 part. I understand the Roth account provider will calculate the associated losses/gain that comes with the ~$900.

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DeluxeXL t1_jaa94ug wrote

The excess contribution is rounded to $10 per Pub 590-A worksheet. You need your MAGI.

You can remove more, or even the entire contribution. But the more you remove, the more penalty applies if you have a positive net income attributable to the contribution.

If you didn't have a gain, just remove all and re-contribute the full $6k to traditional IRA.

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mch_2 OP t1_jabbdnm wrote

I believe AGI includes this which is applicable for me:

  1. net capital losses (up to $3000)

Both of these helped me reduce my AGI, but still a bit over the limit.

https://www.investopedia.com/terms/m/magi.asp says MAGI needs to remove deductions from "passive income/loss"... But not sure what that means, and if it includes (1).

The IRS worksheet 2-1 does not mention (1) so I think my AGI = MAGI?

I will definitely go the trad IRA/backdoor route in the future.. I do have losses for all $6000, so removing all seems like an easy solution?

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DeluxeXL t1_jacgsnc wrote

>I will definitely go the trad IRA/backdoor route in the future.. I do have losses for all $6000, so removing all seems like an easy solution?

Yes. If you have loss, remove all (note that less than $6000 will be moved out, but this is ok), recontribute $6000.

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