If you're working on your tax return for 201
There are two things, especially, look for, reports CNBC: whether or not you took the required minimum distribution (RMD) if you're at least 70½ and if you contributed too much.
Skipping your RMD
Missing and RMD from a traditional IRA is a particularly costly mistake. The IRS will charge you 50 percent of the discount, on top of other taxes, if you don't. Kiplinger explains what would actually look like:
If you had an IRA worth $ 200,000 and you were 72 years old, your RMD would be approximately $ 7,813. If you have some of the required distribution you can get the IRS in penalty of $ 3.907.
This one is easy-ish to fix, however, especially if you catch it now. You should immediately take the distribution, and then you will have to file tax form 5329, "Additional Taxes on Qualified Plans (Including IRAs) and Other Tax Favored Accounts." Make sure you request the penalty be waived (it will be if the IRS it was a reasonable mistake, and attach a letter explaining what happened. Kiplinger reports that there are real guidance to what the IRS will accept as "reasonable," but there is a "good chance" it will.
To avoid this in the future, talk to your account about automatic disbursements on set dates.
Save the Contribution Limit of Your IRA
If you can max out your IRA every year, you're in good shape . Not only are you saving for your…
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Saving too much
For 2018, the IRA or Roth's contribution limit was $ 5,500, or $ 6,500 if you're 50 or older. If you have more than that, you are 70 or older and contributed to a traditional IRA at all, you are on the line for a six percent tax penalty.
You may have accidentally contributed more than that amount simply because you forgot, or because you didn't know the rules. If you have a roth, maybe a change in income – say, a bonus or a raise at a new job – you put the income limit. Whatever the cause, if you notice this before you file your taxes, you can withdraw the excess contributions and any earnings by the tax deadline.
“And if you're under 59½, you'll be subject to a 10 percent early withdrawal penalty.”
Otherwise, you might also be able to reduce this year's IRA / Roth contributions by the amount you contributed over the threshold in. 2018. "For example, if your limit is $ 6,000 and you exceed it at $ 1,500 in the current year, you can offset the excess by limiting your contributions to $ 4,500 the following year," notes Vanguard. But you'll find that six percent penalty until you rectify the situation.
RothaIRA.com recommends reorienting the contribution as a normal IRA contribution (note: the limit overall is still $ 5,500 for 2018, this is just in case that your income is over the Roth's threshold of $ 199,000 for individuals jointly and $ 135,000 for singles.
Contribute each pay period, that's an easy fix in the future — work with your service to automate accurate contributions. Just remember that this year's contribution limit is $ 500 more than 2018's.