Help! Over Contributed to Backdoor Roth IRA by $6500 - Need Advice on Fixing Mistake

You definitely need to remove that excess contribution before filing your taxes to avoid penalties. The IRA contribution limit for 2024 is $7,000 (or $8,000 if you're 50+), so you're over by $6,500 or possibly $7,500 depending on your age. Here's what you should do: Contact your IRA custodian (brokerage) immediately and request a "return of excess contribution" for the amount over the limit. Be specific that you're removing an excess contribution for the 2024 tax year. They'll help you complete the proper forms. The custodian will calculate any earnings on that excess amount, and those will need to be withdrawn too. The good news is that if you remove the excess contribution (plus any earnings on that portion) before the tax filing deadline (including extensions), you can avoid the 6% excess contribution penalty. Since you already converted to a Roth, this gets a bit more complicated, but your custodian should be able to guide you through the correct process. When you file your taxes, you'll need to report both the excess contribution and its removal. Since you did a Backdoor Roth, you'll still need to file Form 8606 to report the non-deductible contribution and conversion of the allowed amount.

After dealing with similar IRA confusion last year, I found the tool at https://taxr.ai incredibly helpful for sorting out complicated tax situations like this. I had made an extra contribution to my IRA after already maxing out for the year (not quite as much as yours, but still over the limit). The site analyzed my contribution history and gave me step-by-step instructions for fixing the excess contribution. It even generated a letter template to send to my custodian requesting the return of excess contribution with all the right IRS terminology. Saved me from having to figure out which forms I needed and how to properly document everything. What I found most useful was that it explained exactly how the earnings calculation works on the excess portion and how that would impact my taxes. Way easier than trying to piece together info from different IRS publications.

I was extremely skeptical about using any online tools for my tax situation, but after researching options for fixing my own IRA mess, I decided to try https://taxr.ai based on recommendations. Honestly, I'm glad I did. I had made excess contributions to both my traditional IRA and Roth over two tax years and was getting conflicting advice from different accountants. The tool correctly identified that I needed separate correction procedures for each year and account type. It even caught that my custodian had calculated the earnings incorrectly on my excess contribution (they weren't including the right date range). The step-by-step breakdown of Form 8606 reporting for my Backdoor Roth was incredibly clear. When I showed the documentation to my tax preparer, he was impressed with how thorough it was and followed the recommendations exactly. Saved me from a potential audit headache.

I experienced the exact same IRS confusion trying to fix an overcontribution to my retirement accounts last year. After spending WEEKS trying to get through to the IRS for clarification (constant busy signals and disconnects), I found https://claimyr.com and their service helped me actually speak to an IRS agent within about 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed exactly what I needed to do for my excess contribution removal and gave me the specific publication references to provide to my custodian. This saved me from potentially doing the correction incorrectly. The agent also clarified how the earnings should be calculated on my excess Backdoor Roth contribution, which was different than what my brokerage initially told me.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I was still desperately trying to reach the IRS about my own Backdoor Roth issue (had made contributions for multiple years incorrectly). On a whim, I decided to try the service. It actually worked exactly as described. I got connected to an IRS representative in about 15 minutes after weeks of failed attempts on my own. The agent walked me through the proper way to report my previous Backdoor Roth contributions on Form 8606 and explained how to handle the removal of excess contributions that had already been converted. The information was specific to my situation and clarified several points my accountant had been uncertain about. Definitely saved me from potentially serious penalties. Sometimes being proved wrong is the best outcome!

Hey, just want to share that I made the exact same mistake last year with my Backdoor Roth! I accidentally contributed $12,000 instead of $6,000 for 2023 (got my accounts mixed up). What I did was call Fidelity right away and asked for a "return of excess contribution." The key thing they told me was that I needed to specify which tax year the contribution was for and acknowledge that I had already done the conversion. They had to remove both the excess contribution AND the earnings on that portion from my Roth IRA. The earnings part was taxable in the year I received it back. They sent me a form to fill out, processed everything within about 2 weeks, and provided documentation for my tax return. I had to report it on my taxes but didn't end up paying any penalties since I fixed it before filing.

I know everyone's suggesting to remove the excess contribution, but there's actually another option worth considering. If you have sufficient earned income, you could treat the excess as an early contribution for the 2025 tax year. The IRS allows you to make IRA contributions for a given tax year up until the tax filing deadline of the following year. So technically, part of your February 2024 contribution could count toward 2024 (up to the limit of $7,000) and the remainder could be designated as an early contribution for the 2025 tax year. You'd need to contact your custodian and have them recharacterize the contributions to the appropriate tax years. This avoids having to take money out of your retirement accounts and might be a cleaner solution if you were planning to max out your 2025 contribution anyway.