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I am doing my taxes using the H&R block software and I've run into a problem. I keep getting an error showing up that I've made excess IRA contributions. I opened an IRA back in August with $20 and I've never added anything to it. My Roth IRA contains ONLY $20.11 according to my statement. Now, I'm being told I have to pay a 6% fee. How on eath can everyone else be able to add thousands of dollars and be fine and I owe on a $20 account. I don' have any other accounts either.
There are rules for eligibility on contributing to an IRA. I had to change my post - for some reason I thought you said you had a 401K. Maybe someone else can explain this better than me.
OK, let's see if I can clarify. Publication 590 says:
Who Can Set Up a Traditional IRA?
You can set up and make contributions to a traditional IRA if:
You (or, if you file a joint return, your spouse) received taxable compensation during the year, and
You were not age 70½ by the end of the year.
You can have a traditional IRA whether or not you are covered by any other retirement plan. However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. See How Much Can You Deduct, later.
So, you can have an IRA and you can make contributions, but whether or not those contributions are tax deductible is a different story. It's not making any sense as to why the tax software thinks you have "excess" contributions.
Moonlady, she said it was a Roth IRA, not a traditional.
Kickchick (I like that handle, BTW), I take it you didn't contribute to any other IRAs (Roth or traditional) last year? E.g., if you contributed $5k to a traditional IRA in January, then $20 to your new Roth in August, the Roth contribution would be in excess of the annual limit. If it's not that, and if it's not the income thing, I don't know why your software would be telling you that. Sounds like a glitch (or a mistake) somewhere.
I use H&R software and have Roth's and have no issues, most likely user error.
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