Never had penalized ira contributions before...

[schirallicpa]

Last year my client had paid into a Roth which was over amount allowed and was charged 450 bucks (7500 x 6%).

This was actually the first time that I had a client that kept the Roth IRA contribution and paid the tax.  

But I didn't expect to see it again on the 2024 return!  What the heck.  Carry forward the 7500 and hit me again?  I've never had to look at this before.  Just when I thought "I knew everything."

[Lion EA]

How much of a Roth contribution did he qualify for in 2024?

[Sara EA]

The 6% penalty applies each year the excess contribution remains in the account.  The excess and associated earnings must be distributed before the penalty disappears.

[Lion EA]

Can he use up the old excess in 2025 by not contributing that amount this year? Or, does he not qualify to make any Roth contributions this year?

[Catherine]

If the contribution can't be recharacterized to the next year (or even the year after), then he needs to withdraw it. Pronto.

Save for retirement. Don't save for your retirement if you make more than X. Save it this way. Make and honest mistake and we'll punish you while being cagey about how to fix the problem. You put your right foot in, you take your right foot out, you put your right foot in, and you shake it all about.