Question by phxsunsfanaz: What do you do when you make Roth IRA contributions for a year in which your annual income exceeds the limits?
Let’s say a couple made Roth IRA contributions for 2005 in Feb 2005. In 2006, they realized that their 2005 income was much higher than they originally expected and exceeded the $ 160K limit for couples. What are the options available now to undo it?
Best answer:
Answer by ThaneTheBrain
You better talk to a tax person. If you’ve filed already, and took the deduction, then you’ll have to amend. But if you went to file and realized your mistake, they can help you back out your money.
What do you think? Answer below!
My wife and I have Roth IRA’s. We’re close to the income limits. I would like to setup a monthly contribution rate, but I don’t know if I will over contribute because of year end bonuses.
Should I contribute once, at the end of each year (I know I’ll miss out on the interest)?
I also read about being able to contribute some into a roth and some into a traditional IRA. If anyone can clear this up it would be helpful.
Either way, what would happen if I over contribute?
Thank you.
A) are taxed, but the interest in the fund accumulates tax free
B) reduce your taxes, but the interest income on the IRA is taxed in the year that it is earned
C) reduce your taxable income. the funds in the IRA and the return on the IRA are not taxed until the funds are disbursed in your retirement years.
D) are not taxed once when they are placed in the IRA and again when they are disbursed from the IRA
What happens if you exceed the income limits of a roth IRA after years of contributing to it? Can you convert it to traditional? how does this work with taxes?
For the past 4 years I was self-employed and contributed $5000 annually to a traditional IRA (before-tax). Now I work at a company that has a 401(k) plan and matches 3% (vested over 5 years). So my questions are, can I contribute to BOTH? And what are the limits? My w-2 will have the “ret” box checked on it, so I might get hit with an over-contribution if I contribute too much. But right now I am looking to save for retirement and this is a good year for me to stick as much away as possible.
My employer only allows 17% contrubition to 401K and they do not match anything right now (0%) so I will not reach the $15K limit. Anyway to help me get the max tax deferral of $15K?
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