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Excess Roth contribution question
Old 02-14-2020, 09:03 AM   #1
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Excess Roth contribution question

Due to higher than expected income for 2019, I had to reassign the entire $7000 Roth contribution I had made in Jan 2019 to 2020, which will not have as high an income and will be Roth contribution eligible. According to IRS rules, I also had to extract any earnings, which would then be fully taxable. So I had Fido, reassign the contribution to 2020, and calculate the earnings (just over $1400) on that $7000, which they also assigned to 2020. So now the Roth shows excess contribution of $1400 for 2020, which required me to do another excess contribution form file, but for 2020, which required that amount be sent to me (and I had taxes withheld). (No brokerage there).

So the question, which I believe the answer to is yes, is that since I didn’t actually take the distribution until 2020, then all earnings from that $7000 2019 contribution are not included in 2019 (at the higher tax bracket), but instead will be taxable “other income” in 2020, which will be in a lower bracket, correct?

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Old 02-14-2020, 09:58 AM   #2
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Yes. The withdrawn earnings will be taxable in 2020 at your ordinary income rates.
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