You may think that the only thing that you have to worry about with your ROTH IRA is staying within your contribution limits. However, there are some mistakes you can make and today we are telling you what some of them are.
Not Making Enough Money
You are unable to contribute more to your ROTH IRA than you made. The IRS uses the MAGI to determine how much you can contribute. Therefore, it is important to make sure that you stay under your limit so you do not set off any red flags.
You Make Too Much Money
You have to stay within a certain income bracket (less than $183,000 for married couples) to contribute the maximum amount. If you make more than the bracket but less than $193,000, you can still contribute but will have your maximum amount reduced. Lastly, once you hit the phase out income limit you will not be able to contribute at all.
It is important that you stay up to date on the income brackets because the IRS changes it each year.
You Contribute Too Much Money
If you have multiple IRAs, it can be easy to over contribute. If this happens, you can expect to have to pay a penalty. If you catch the error before filing taxes, you can take the money out of the account to avoid the penalty or you can carry over the contribution to another tax year.
These are just three of the mistakes that ROTH IRA owners make. However, keep in mind that you can also find yourself making the mistake of filing separately and breaking the 365-day IRA Rollover rule. If further advice on your retirement nest egg is needed, call Seattle CPAs Huddleston Tax CPAs at (425) 483-6600.