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Excess ROTH contribution withdrawn with a loss

linduca1216
Level 4

Removing ROTH contributions - both erroneously made in 2021 for tax years 2019 and 2020.  They are the only contributions in the account.  Account is in a loss situation.   How to report the loss, etc?

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qbteachmt
Level 15

You are handling Corrective Distribution, not Loss reporting.

I like web articles meant for the investor, such as:

https://www.fool.com/retirement/plans/roth-ira/excess-contribution/

https://www.taxact.com/support/1280/2016/ira-or-roth-ira-excess-contributions

https://www.investopedia.com/articles/retirement/04/042804.asp

https://www08.wellsfargomedia.com/assets/pdf/personal/goals-retirement/taxes-and-retirement-planning...

 

And of course, the IRS:

https://www.irs.gov/publications/p590a

 

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linduca1216
Level 4

"You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. If there was a loss, the net income you must withdraw may be a negative amount."

Am wondering how/where to enter amounts when this is the case.

 

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linduca1216
Level 4

Just looked at the WellsFargo article - it specifically gives an example of there being less in the account than the original contrib... SInce gain would be recognized, thought a loss would be also.

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qbteachmt
Level 15

If I put in $6k and wasn't eligible or that is excess as duplicate or whatever reason, and in the meantime it is down to $5k, I take out $5k. There is no reporting of the loss for these protected accounts. It is no different than spending that money outside of retirement, since it was not an allowed or protected activity in the first place (not eligible).

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