I am new to this, and just started contributing to IRA. I do have a 401k from my employer to which I max out, but I want to try to save more, so I started to look into Roth IRA.
In February 2020 I made $6000 in contributions to Traditional IRA for Tax Year 2019, and then moved that 6000 to Roth IRA (backdoor IRA). Later I made another contribution of $3000 to Traditional IRA for Tax Year 2020, and then moved that 3000 to Roth IRA (backdoor IRA). In the Roth IRA account, I did some investments, and as a result the total amount in the Roth IRA account is $9200, and total in the Traditional IRA is $0.
When I was filing my taxes through TurboTax, it said that I had an excess contribution to the Roth IRA by $4050 i.e. Basically I could contribute only $1950 to the Roth IRA for the last year due to income limits. And that I would be charged a 6% penalty until I have that excess amount int he Roth IRA. So I am a bit confused now.
What are my options now?
- Do I just move the $4050 back to the Traditional IRA?
- What happens to the profit of $200 I made in the Roth IRA?
- So in the above scenario, what is the benefit of the