Hello, I have a question. Please be kind.
I opened a Roth IRA in April 2022 with Vanguard. I knew my income was too high in 2021, so I intentionally waited until 2022 to open it. I processed my 1st transaction of $3,000.
I was so excited. I remember it asked if I wanted to apply it to 2021, no I didn’t and believed that was the choice I made. Later in 2021 I received a Form 5498 stating that $3,000 was applied to 2021. What!!! No!!! I called Vanguard and asked if we could do a correction.
I wanted that in 2022, not 2021. They told me the only way to correct it was to process an excess contribution + earnings, have the money returned and turn around and redeposit it for 2022.
I explained the money was deposited in the year 2022, wasn’t there a way to do a correction to the year? No! So I agreed to do whatever I needed to correct it. I don’t want to get into trouble with the IRS. Since the market was down, my $3k was now $2,641.34.
They returned that amount to me. Now doing my taxes I am told I have to correct my 2021 taxes and pay taxes on the money returned.
I thought you could take your contributions out at anytime. this money was after tax money. What?
I clicked the wrong box and not only lost $358.66 but I have to redo 2021 taxes and pay taxes on this?
This seems wrong… can some explain this to me.
Thank you in advance for your help and being kind.
I already know I made a stupid mistake no need to state the obvious.