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Having to back out contribution from RothIRA

January 31st, 2016 at 05:37 pm

Hi all

Got my w2s and talked to my accountant and really even if he works his magic it will be hard for me to get my income down to contribute to the ROTH IRA last year and likely this year. I am withdrawing my contribution/backing out my contribution from last yearr as well as the $500 I put in this year f and will put it into my taxable investment accounts

I talked to vanguard and they recommended AGAINST contributing to the regular IRA with after tax dollars as I do not get a deduction and it will be taxed again at withdrawal.

So until my income goes down I am limited to the 401k.. $18k and the HSA account

Homes still going smoother.. the guy who we were evicting moved out a few days ago so folks are busy cleaning up, throwing out, doing some quick minor fixes and getting it ready to rent. I am setting a budget of $1500 and am looking to get it listed by the end of htis upcoming week.

I talked to the neighbors (I own that house too) and they are very happy. no issues.. so felt good to hear that.

Trying to run these homes tighter.

Property manager will tell me his rent estimate tomorrow.

I am also putting together a list of 'larger improvement items'across the homes so I can knock those off as I go along but no pending large repairs needed

Posted in Musings | 3 Comments »

3 Responses to “Having to back out contribution from RothIRA”

  1. Petunia 100 Says:
    January 31st, 2016 at 06:14 pm 1454264050
    1454264050

    Non-deductible contributions are not taxed again at withdrawal. You track your basis with form 8606, an attachment to your 1040. When it is time to withdraw, a portion of each withdrawal is deemed to be from your non-deductible contributions and is not taxed.

    Have you considered a back door Roth contribution? Since there is no income limit to convert from a traditional to a Roth, some people make a non-deductible traditional IRA contribution then immediately convert to a Roth. Do you currently have deductible contributions sitting in traditional, Simple, and/or SEP IRAs? If so, it complicates matters as you must convert a pro-rata share of deductible and non-deductible contributions.

  2. Rachael777 Says:
    February 1st, 2016 at 03:08 pm 1454339282
    1454339282

    Thanks for this post. Let me 'digest' it a bit and then get back to you. they did mention tracking things but that seemed too complex to be worth the trouble but let me think on that again. I do have PRE tax money (from an old 401k) in my regular IRA. If I set up a separate IRA would it simplify withdrawal as the money will not be mixed or IRS looks at all IRAs (whatever account they were in)

    Thanks!!

  3. Petunia 100 Says:
    February 2nd, 2016 at 06:53 am 1454396022
    1454396022

    Unfortunately, the IRS looks at all of your traditional, SEP, and Simple IRAs as one pot of money. You can still do the backdoor Roth, but part of your conversion will be taxable. Most of it, if you have a good chunk of money in that traditional IRA. And you will still have most of your non-deductible contribution sitting in your traditional IRA, so it will need to be tracked from now on.


    Alternatively, you could just take care to choose very tax-efficient investments in your taxable account.

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