excess contribution to IRA

[JGH1976]

I retired and no longer earn wages. Yet I still made contributions to my traditional IRA in 2020 and 2021. I realized my mistake and withdrew the excess contributions on 02/14/2023. What should I do now? I need your advice. Thanks.

[fanfare · Accepted solution]

you have to file 2020 and 2021 amendments with 2020 Form 5329 and with 2021 Form 5329 showing the excess and paying the penalty

your 2022 Form 5329 will show the excess resolved  by removal since you did it before the due date of your 2022 tax return.

-

return of excess contribution:

after tax due date including extensions: you distribute the excess amount being carried forward on 5329,
(or offset it with currently allowed contribution) .

Earnings stay in the Roth account.

@JGH1976 

[JGH1976]

Thanks for your clear and quick answer!

I wonder if I can do the amendments using Turbotax software, or do I have to do it manually?

[fanfare · Accepted solution]

If you are a desktop program user and still have the sofware installed for those years, you can use it,

if you are an Online user, you have to ask TurboTax Support to give you software for 2020 and 2021.

OTHERWISE,

You must be very familiar with Form 1040-X, or able fo become familiar quickly,  to do it manually.

The penalty from Form 5329 goes on Form 1040-X line 10. Col B. 

adjust the subsequent lines  11-20 to show that you owe that much more money.

When mailing 1040-X, do not include your old 1040 nor your revised 1040 because the Form 1040-X reflects any changes there and becomes your new tax return.

Therefor your amendment is two forms, Form 1040-X and Form 5329.

@JGH1976 

[fanfare · Accepted solution]

note that your 2021 Form 5329 will show a carry forward from 2020,

so you will pay the 6% on 2021 excess  once, and the 6% on 2020 excess twice.

[JGH1976]

Thank you so much for your thorough and complete answer! I am on my way to amending my tax right away. 

[JGH1976]

I open my 2021 TurboTax CD version and start to amend the return.

It shows me a list of items I can change, such as W2, 1098-T, ..., Other tax situations, etc. I don't know which one to select in order to fix my excess IRA contributions.

[fanfare · Accepted solution]

In Forms mode, open up a "Form 5329"

@JGH1976 

[fanfare · Accepted solution]

This reminds me,

when paper filing, for this situation,

Schedule 2 Part II is also a new-or-changed form that should be included with Form 1040-X.

@JGH1976 

[JGH1976]

Dear fanfare:

It's done! Thank you so much. 

JGH1976