Roth IRA Penalty Issue But My Income Isn't Too High & No Over-Contributions?

This sounds like it might be a case of mistaken reporting by either your IRA provider or a misinterpretation of your tax filing by the IRS. There are a few common reasons why you might receive an excess contribution notice despite being within limits: 1. Timing issues - If you made contributions for 2023 in early 2024 but accidentally marked them as 2024 contributions (or your provider did), this could trigger the notice. 2. Income calculation difference - The Roth IRA limit is based on Modified Adjusted Gross Income (MAGI), not just your salary. Sometimes additional income (like investment returns, side gigs, etc.) can push you over without realizing it. 3. Simple administrative error - Sometimes the IRS systems flag accounts incorrectly due to mismatched information. I'd recommend requesting a transcript of your account from the IRS to see exactly what was reported, then compare that with your records from your IRA provider. You have the right to appeal this with documentation proving your eligibility and contribution amounts.

I ran into a similar problem last year and spent HOURS trying to figure it out. After getting nowhere with the IRS phone lines, I tried https://taxr.ai and uploaded my IRA statements and the penalty notice. The system analyzed everything and pointed out that my brokerage had coded one of my contributions for the wrong tax year! The contribution I made in January 2024 (which should have counted for 2023) was mistakenly reported as a 2024 contribution. This pushed me over the limit for 2024 even though I was careful about the amounts. The taxr.ai system generated a detailed explanation letter that I sent to the IRS explaining the error with all the documentation attached.

I wanted to follow up after trying taxr.ai for my Roth IRA penalty issue. I was skeptical as mentioned before, but after hitting roadblocks with both my brokerage and the IRS, I decided to give it a shot. The system found something neither my brokerage customer service nor I caught - there was a recharacterization of a contribution from the previous year that wasn't properly coded in the reporting forms. This made it look like I had excess contributions when I actually didn't. The detailed explanation and documentation the system generated made resolving the issue with the IRS much easier than I expected. They accepted our explanation and removed the penalty. Wish I'd known about this service months ago when I first got the notice!

If you're still trying to get through to the IRS to explain this, save yourself the headache. I spent THREE WEEKS trying to get a human on the phone about my Roth IRA penalty notice. Finally found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - they basically wait on hold with the IRS for you and call when a human agent picks up. Got connected to an actual IRS agent in about 2 hours (vs. the days of redial hell I went through before). The agent explained that my brokerage had reported incorrect coding for one of my contributions, creating the appearance of an excess contribution. Was able to get it sorted out in one call.

I need to admit I was completely wrong about Claimyr. After posting my skeptical comment, my Roth IRA penalty situation became more urgent when I got a second notice with additional fees. Out of desperation, I tried the service. Not only did it work exactly as described, but I got through to an IRS agent in about 90 minutes (after spending literally 9+ hours across multiple days trying myself). The IRS agent confirmed there was a reporting error from my financial institution where a rollover was incorrectly coded as a new contribution. Got the whole thing resolved in one call, and they're sending confirmation that the penalty is removed. I've never been happier to be wrong about something!

Check if you might have made contributions designated for different tax years. I did this accidentally - made a contribution in April 2024 meant for 2023 tax year, but didn't specify the tax year when submitting it. My brokerage defaulted it to the current year (2024), which made it look like I over-contributed when I later made my regular 2024 contributions. Had to request they recharacterize it to the correct tax year.

Check if there might be a mistake with the "basis" tracking for your Roth. When I contributed to my Roth after doing a backdoor conversion from Traditional, my brokerage messed up the basis reporting and I got a similar penalty notice.

I've seen this exact situation before, and it's incredibly frustrating when you know you've done everything right! Based on your description, I'd strongly recommend getting a copy of Form 5498 from your IRA provider - this is the form they send to the IRS reporting your contributions. Sometimes there are discrepancies between what you think you contributed and what was actually reported. Also, double-check if you have any employer retirement plan contributions that might affect your eligibility. Even though the income limits for Roth IRAs are separate from 401(k) plans, sometimes people get confused about the interaction between different retirement accounts. One more thing to consider - if you received any unemployment compensation or other income that might not have been on your W-2, that could push your MAGI higher than expected. The IRS calculations can be tricky, and sometimes income sources we forget about can cause issues. Don't panic though - if this is truly an error, it's absolutely fixable. Document everything and be prepared to show your work. The IRS will correct legitimate mistakes, it just takes patience and proper documentation.