I need some help with figuring out how to fix the exceeded Roth IRA contributions I made in 2021 and 2022. I have not yet taken any action yet as I'm trying to figure out the next steps. Summary:2021: Made excess contribution of $1,764 (exceeding reduced Roth IRA limit)2022: Made excess contribution of $148.4 (exceeding reduced Roth IRA limit)2023: Did not quality for any the Roth IRA contribution (no contributions were made)Both of these were missed in last 3 years of tax returns. Questions:How much should I be withdrawing now in 2024? Would it be ($1,764 + $148.4) + earnings? Can I withdraw this back into my savings? I didn't quality for any Roth IRA contribution for 2023 to roll over.How would I calculate the 6% penalty for the two excess contributions over each of the years?Is the 6% penalty on the contribution + earning?Do I need to pay penalty for 2023? ex. For 2022 Form 5329, I'll have to pay 6% on the 2021 + 2022 excess ($114.74 not including earning)Will a previous year's From 5329 covers both excess contributions?ex. one 2021 Form 5329 for 2021's excess, and one 2022 Form 5329 to cover 2021 + 2022's excess.Would I need to fill out one for 2023? Can these forms (and penalty) be submitted (and paid) directly from TurboTax? I still have the previous versions.I read that once I withdraw the excess contributions, I would receive the 2024 1099-R the following year (2025). I think this cuts close into the 3 year deadline of amending tax returns (for 2021's). Is there a way to manually fill out the 1099-R on TurboTax? How should the fields be filled?

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Question

Excess Roth IRA Contribution in 2021 and 2022

Forum|Forum|2 years ago
January 21, 2024
23 replies
137 views

I need some help with figuring out how to fix the exceeded Roth IRA contributions I made in 2021 and 2022. I have not yet taken any action yet as I'm trying to figure out the next steps.

Summary:

2021: Made excess contribution of $1,764 (exceeding reduced Roth IRA limit)
2022: Made excess contribution of $148.4 (exceeding reduced Roth IRA limit)
2023: Did not quality for any the Roth IRA contribution (no contributions were made)

Both of these were missed in last 3 years of tax returns.

Questions:

How much should I be withdrawing now in 2024? Would it be ($1,764 + $148.4) + earnings?
- Can I withdraw this back into my savings? I didn't quality for any Roth IRA contribution for 2023 to roll over.
How would I calculate the 6% penalty for the two excess contributions over each of the years?
- Is the 6% penalty on the contribution + earning?
- Do I need to pay penalty for 2023?
- ex. For 2022 Form 5329, I'll have to pay 6% on the 2021 + 2022 excess ($114.74 not including earning)
Will a previous year's From 5329 covers both excess contributions?
- ex. one 2021 Form 5329 for 2021's excess, and one 2022 Form 5329 to cover 2021 + 2022's excess.
- Would I need to fill out one for 2023?
- Can these forms (and penalty) be submitted (and paid) directly from TurboTax? I still have the previous versions.
I read that once I withdraw the excess contributions, I would receive the 2024 1099-R the following year (2025). I think this cuts close into the 3 year deadline of amending tax returns (for 2021's). Is there a way to manually fill out the 1099-R on TurboTax? How should the fields be filled?

Mike9241

Level 15

did you submit your return for 2021 because the 5329 should have been included? If you filed without it you'll need to amend to include the 5329 which will show the 1764 excess subject to the 6% tax. the IRS will bill you for any penalties and interest for late payment.

for 2022 the same thing except that it shows both the excess for 2021 and the excess for 2022 subject to the 6% penalty. again the IRS will bill you for penalties and interest. For 2023 you must withdraw the excess by 10/15/2024 + earnings on the excess. the earnings will be taxable in 2024. contact the custodian to inform them you're withdrawing excess contributions + earnings and ask them to calculate the earnings.

Mike9241

fanfare

Level 15

after tax due date including extensions: you distribute the excess amount being carried forward on 5329,
(or offset it with currently allowed contribution) .
An amended return will be needed supplying Form 5329 since there is a 6% penalty per year on excess contributions .
Earnings stay in the Roth account.

This applies to 2021 and 2022, and 2023

since your excess remained in the account through 2023.

Resolution of the excess now would be reported on your 2024 tax return.

@ww_94

fanfare

Level 15

I updated the last part of my reply.

@ww_94

Alvin8104

Level 2

When will the form 5329T be available to file. Date says 1/24/2024.

I can't efil my return because of this.

Is there any update

DoninGA

Level 15

@Alvin8104 wrote:

When will the form 5329T be available to file. Date says 1/24/2024.

I can't efil my return because of this.

Is there any update

Even though the date of the TurboTax website shows 01/24, TurboTax normally updates their software on a Thursday. So check back tomorrow on 01/25.

CatinaT1

Alumni - Intuit

Like fanfare said, If your CA tax did not change you don't have to amend.

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ww_94Author

Level 2

@CatinaT1 It only didn't change because I didn't know if there were any adjustments needed to be made to the CA tax return for excess Roth IRA contributions. Is there a section in the CA state tax return that accounts for excess Roth IRA contributions just like there is in the federal tax return? I was not able to find it

DanaB27

Employee Tax Expert

You do not need to amend your CA tax return.

"Also, California does not have taxes similar to the tax on excess contributions to traditional IRAs, Roth IRAs, Coverdell ESAs, ABLE accounts, Archer MSAs, or tax on excess accumulation in qualified retirement plans." (2021 Instructions for Form FTB 3805P)

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