Hi guys,

In 2021 I put $6000 in a Roth IRA but then realized I wasn't supposed to because of my income bracket. I spoke with Vanguard who had said I should just take it back out, so I ended up transferring the money back into my bank account a few days later. Just now got mail from the IRS saying that $6000 was "retirement income" that I didn't report. I owe around $4000 between taxes, penalties, fees, and interest. I spoke with a CPA who said there is nothing that can be done and I have to pay it. A Vanguard advisor also said the same thing. Just checking here as well, does anyone know if something can be done? I don't want to risk trouble with the IRS so I am considering just being quiet and paying it quickly.

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[deleted] t1_je0qtac wrote on March 28, 2023 at 4:09 PM

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DeluxeXL t1_je0qt8r wrote on March 28, 2023 at 4:09 PM

Was there any change in account value between the 2021 contribution and withdrawal? For example, if account value immediately before contribution was $30000.00, contribution was $6000.00, and account value was $36000.00 immediately before withdrawal, then there is no change.

>I spoke with Vanguard who had said I should just take it back out, so I ended up transferring the money back into my bank account a few days later.

You were supposed to go through "return of excess contribution", not just a withdrawal. Withdrawal does not undo a contribution unless the net income attributable is also removed.

DFWNannySearch OP t1_je0sm97 wrote on March 28, 2023 at 4:21 PM

Looks like it made $0.01 in interest, but that was also removed with the $6000. Would there have been a form for "return of excess contribution"?

DeluxeXL t1_je0t73r wrote on March 28, 2023 at 4:24 PM

Call the IRS to discuss. You might be able to convince them that you did everything required by law to return the excess contribution - that the withdrawal was actually the return of excess contribution. It's just not coded properly on 1099-R.

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1955photo t1_je0r2f1 wrote on March 28, 2023 at 4:11 PM

Ask the CPA to contact the IRS for you.

[deleted] t1_je161va wrote on March 28, 2023 at 5:45 PM

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jb t1_je0q2nh wrote on March 28, 2023 at 4:04 PM

You can talk to a lawyer and they can try to bargain it down and you have to pay them but otherwise no.

DFWNannySearch OP t1_je0qqam wrote on March 28, 2023 at 4:09 PM

With lawyer fees I wonder if it's worth the hassle then?

jb t1_je0rixl wrote on March 28, 2023 at 4:14 PM

I’m sure you can get a free consultation to find out.