Overpaid my Roth IRA by an astounding $1300. What to do?
February 6, 2013 7:38 PM Subscribe
Not sure what happened, but I have a Simple Roth IRA through Fidelity that I overpaid accidentally. I'm in my 40s, so as I understand it, can put in up to $5,000 per year. Last year, I overpaid my maximum by something like $300. I didn't worry too much about it. Starting to do my taxes this year, I looked at my Fidelity statement and it looks like this year I overpaid by $1300. What are my options? How does this affect my taxes, if at all?
posted by HeyAllie to Work & Money (8 answers total) 2 users marked this as a favorite
Tomorrow I'll check in with our office bookkeeper to find out what happened. I have not changed how much I contribute out of my paycheck in several years, so I'm not sure why there was a massive overpayment. My income did not increase that much (important to note since my company matches a tiny amount of my contributions).
I read somewhere that if I decrease my contributions this year to match my total overpayment for the last two years ($1800), then I won't be subjected to a 6% tax on the overpayment for each year those overpayments sit in my account. If I do that, am I good to go?
I'm also not exactly sure when this 6% tax is incurred if I don't do anything. Is it taxed when I finally take out money from the Roth IRA when I retire?