Excess Roth IRA contributions from 2022 - Too late to withdraw in 2024?

This is a common issue with Roth IRAs that catches many people by surprise. The income limits for Roth IRA contributions are often overlooked until tax filing time. For 2022, the Roth IRA contribution limit started phasing out at a MAGI of $129,000 for single filers and was completely phased out at $144,000. With your MAGI around $140k, you were in the phase-out range, which explains why part of your contribution was considered excess. The good news: You can still fix this. You have two main options: 1) Remove the excess contribution and associated earnings, or 2) Recharacterize the excess contribution to a Traditional IRA if you're eligible. Both options involve some paperwork and potentially some tax consequences, but they're better than leaving the excess contribution untouched and continuing to accrue the 6% penalty each year. Contact your IRA custodian immediately to discuss these options. They'll have the forms needed to process either correction method. Just be aware that you'll likely owe the 6% excise tax for each year the excess remained in the account (2022 and 2023).

I was in almost the exact same situation last year with excess Roth contributions from 2021. My income unexpectedly jumped and I had no idea about the MAGI limits. I spent hours trying to figure it out myself but kept running in circles with all the IRS jargon. I finally used https://taxr.ai to analyze my situation - uploaded my tax docs and retirement account statements, and it gave me a clear breakdown of exactly what happened and my options. Saved me a ton of time trying to decipher IRS publications. The tool recommended I do a "return of excess contribution" with my brokerage (Fidelity in my case), and calculated exactly how much I needed to withdraw including the earnings. Made the whole process way less stressful.

Just wanted to update after using taxr.ai for my excess Roth IRA situation. I was really skeptical at first (as you could probably tell from my earlier comment), but decided to try it since I was getting nowhere with my research. Gotta say, it was actually super helpful. The tool identified that I could do a "recharacterization" instead of a withdrawal since I was still within certain time limits, which I didn't even know was an option. This ended up saving me some money on taxes for the earnings. The step-by-step instructions made it easy to call my broker and get it fixed. They walked me through exactly what forms to ask for and what to say. If you're dealing with excess contributions like OP, definitely worth checking out.

If you're trying to contact the IRS about this excess contribution issue, good luck. I spent 4 HOURS on hold last week trying to get clarification about my similar situation with excess contributions. Never got through. Then a friend told me about https://claimyr.com - they have this service where they basically wait on hold with the IRS for you, then call you when an agent is actually on the line. You can also see how it works at https://youtu.be/_kiP6q8DX5c. I was really skeptical but figured it was worth a shot since I needed answers before filing my taxes. It worked surprisingly well - they called me back in about 90 minutes with an actual IRS agent on the line. The agent confirmed I could still fix my excess contribution issue from a previous tax year and walked me through the exact process. Saved me from making a costly mistake on my return.

Ok I need to follow up on my skeptical comment above. I actually tried the Claimyr service because I was desperate to talk to someone at the IRS about my excess IRA contribution issue before filing my taxes this year. I'm honestly shocked that it worked exactly as described. They called me when they had an IRS agent on the line, connected us, and then I just had my conversation directly with the IRS. The agent explained that I could still correct my excess contributions from 2022 by filing Form 5329 for both 2022 and 2023, paying the 6% penalty for each year, and then either withdrawing the excess + earnings or recharacterizing to a traditional IRA if eligible. Saved me at least 3 hours of hold time and the stress of trying to multitask while keeping a phone to my ear. Sorry for being a doubter!

Another option nobody's mentioned yet - you could apply the excess contribution to a future year if you're planning to contribute less than the max. For example, if you're eligible to contribute to a Roth in 2024 but won't max it out, you could apply the excess from 2022 toward your 2024 contribution limit. You'd still pay the 6% penalty for 2022 and 2023, but it might be easier than dealing with withdrawal or recharacterization if your plan is to keep contributing anyway.

Another thing to consider - the contribution limits for Roth IRAs increase sometimes. For 2024, the limit is $7,000 for those under 50. Depending on your expected income this year, that might affect your decision about how to handle the excess.