Accidentally deposited max contributions into ROTH IRA and withdrew on the same day
Main Problem:
- The user is concerned about the tax implications of withdrawing $6,500 from their Roth IRA due to not submitting a Return of Excess Contributions form.
Discussed Solutions:
- Complete a Return of Excess Contributions (ROE) form to remove the over-contribution from the account, regardless of earnings.
- Consider recharacterizing the contribution from a Roth IRA to a Traditional IRA, which would involve potential tax implications if there were earnings.
- Submit a Letter of Instruction (LOI) alongside the ROE form to indicate that the contribution amount has already been withdrawn.
- Access the LOI form on Fidelity’s “All forms” page and submit it securely via a message if needed.
- Contact Fidelity’s Retirement team for further assistance, though it’s not necessary to call before submitting the forms.
Here’s the full thread
I did not realize that I had to submit a Return of excess contributions form and am worried about the tax implications of pulling out $6500 from my roth ira
I deposited on dec 4th and pulled the same amount out the same day, is there anything I can do about this to prevent tax implications when doing my taxes next year?
note: no earnings were made, it was not used to invest in anything, I only deposited $6500 and then withdrew $6500
Hey there!
At Fidelity, we offer the following methods to correct an excess contribution:
Complete a return of excess contribution (ROE) form: This would remove your contribution (plus or minus any gains or losses) from your account. Any earnings would be subject to tax and the 10% early withdrawal penalty. By completing this, you would end up selling the holdings in your account in order to withdraw the cash. Note, I know that you do not have earnings but if you did this would be applicable to you! Nevertheless, you can still submit an ROE without earnings.
Return of Excess Form (Login required) https://www.fidelity.com/retirement-ira/excess-ira-contributions
Recharacterize your contributions: you could complete a recharacterization of your contributions (plus or minus any gains or losses) from your Roth IRA into a Traditional IRA. Any earnings associated with the excess contribution would be subject to income tax and the 10% early withdrawal penalty if you are under age 59.5.
Recharacterization Form (Login required) https://www.fidelity.com/retirement-ira/recharacterize
Given that you have already withdrawn your cash, when submitting either of these forms, you must provide us with a Letter of Instruction (LOI) alongside the form stating that you have already removed the contribution amount. This will ensure we do not remove any additional funds outside of the over-contribution. If you have questions surrounding this, we recommend contacting our Retirements team by phone. Associates are available Monday through Friday, 8:00 a.m. – 8:30 p.m. ET, and can be reached using the link below:
Contact us: https://www.fidelity.com/customer-service/contact-us
If you have additional questions, let us know! 🟢
Hi thank you so much for this information, where can I find the letter of instruction form? Is it also included on the same page as the return of excess form?
Or should I fill out the return of excess and then call the retirements team
Hi @s♡ymilk, happy to chime in here.
You can find and download the LOI form on our “All forms” page here: https://www.fidelity.com/customer-service/forms-applications/all-forms
Additionally, you can submit this form to us in a secure message.
Send a Secure Message (login required): https://digital.fidelity.com/ftgw/digital/secureemail
Now, it is not a requirement to call the retirements team to submit a return of excess contribution but they are a great resource if you have additional questions about your situation.
If there is anything we can clarify or if additional questions pop up, please don’t hesitate to ask! We’re always happy to help. 🟢