IRS has income limits for Roth IRA as given on https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2023. It is hard for me to guess what would be my modified adjusted gross income (MAGI) for 2023, so just to be on safer side, I want to remove my approx. $600 contribution to Roth IRA for 2023. Can I simply transfer the money from Roth IRA to my checking bank account and will be all good?
1 Answer
Request a "Removal of Excess Contribution Form" from your IRA custodian. This will ensure the withdrawal isn't coded in as a standard distribution.
You can also recharacterize the contribution to a Traditional IRA (your custodian should have this form as well) if you want to maintain your max total contributions or want to perform a Roth conversion on that excess. Note the pro-rata rule for Roth conversions (if you have any pre-tax IRA money - trad, rollover, SEP, SIMPLE - you could have a poor tax outcome), and make sure you properly complete Form 8606 (Nondeductible IRAs) for any nondeductible traditional IRA contributions and Roth conversions.
Assuming you file your 2023 tax return timely (by 4/15/24), you have an additional 6 months (10/15/24) to perform your removal of excess contribution or recharacterization while avoiding the 6% penalty on overcontributions.
