Hi Personal finance,
Asking for a friend who is filling out tax stuff and getting ready to submit ahead of april.
- Filer had a salary increase and put them over 150K for the 2025 year without even realizing. Their salary is quite variable due to commissions.
- Jan 2025, they made a one time $7k contribution to roth IRA for the 2025 year.
- While filling out taxes for this year, FreeTaxUSA was saying their AGI was high this year and the contribution to their roth for 2025 is in excess.
What are the next steps that they would have to take to correct things?
A lot of conflicting info online that makes it hard to understand. I saw something about a backdoor roth?
If someone could ELI5 the next steps/process, that would be appreciated.
Next year in 2027 when they file for 2026, their expected AGI would be probably below the 150K potentially. If it is, what would be next steps?
2025 Taxes and Roth IRA Contributions HELP PLZ
byu/alexandled inpersonalfinance
Posted by alexandled
3 Comments
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So did he finish filing or not yet?
Still time to withdraw the excess contribution, and do it through backdoor instead. (contribute to traditional IRA, don’t take deduction, then convert to Roth) Would just owe tax on any earnings
Does he have other deductions and expenses? They might lower his AGI to be within limit. Otherwise, if you’re around that income, its usually safer to just do the backdoor anyway so you have no issue.
The easiest option is to contact the brokerage firm, explain that it was an over-contribution and have them send a check to return the funds, plus any earnings. The other suggestions people have made may save some money, but this should fix the issue with minimal hassle.