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Level 1
posted Jan 20, 2024 5:38:05 PM

Excess Roth IRA Contribution in 2021 and 2022

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:

  1. 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.
  2. 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)
  3. 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.
  4. 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? 

0 23 2731
23 Replies
Level 15
Jan 20, 2024 6:55:51 PM

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.

 

 

Level 15
Jan 20, 2024 9:21:59 PM

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 

 

 

Level 15
Jan 20, 2024 9:25:10 PM

I updated the last part of my reply.

 

@ww_94 

Level 15
Jan 20, 2024 9:42:03 PM

To amend on paper,

you don't have to attach revised 1040, but you have to attach new or changed forms.

In this case the new or changed forms are Schedule 2 and Form 5329.

 

@ww_94 

Level 1
Jan 20, 2024 11:49:55 PM

 

@fanfare So to make sure I'm understanding you correctly:

 

1. Withdraw only the contributions I made to the Roth IRA (2021 + 2022 contributions)

2. Fill out a 5329 for 2021, 2022 and 2023 each with a 6% penalty 

3. I plan to amend online/desktop. I had filed using the desktop TurboTax

 

 

  • I plan to withdraw within the next few weeks (01/2024). Will I need to pay the 6% penalty for 2024 tax return? 
  • I read that I'd need to wait until 2024 to receive my 2024 1099-R. Do you know if I can amend my 2021, 2022 + complete my 2023 tax returns now by filling out my own 1099-R? 
  • I am under 60 so I believe I will need to pay the 10% early withdraw fee. Is this a one time fee for when I fill out 2024's tax return?

 

 

Level 1
Jan 20, 2024 11:57:10 PM

@Mike9241 

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


I didn't not. My understanding is that I will need to amend the 2021 tax return with a 1099-R in order to fill out a 5239 and pay the 6% penalty. 

 


the IRS will bill you for any penalties and interest for late payment.

Will I be able to pay for the 6% penalty in TurboTax itself when I amend the return? 

 


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.

This was an excess contribution to a Roth IRA so I believe I only need to withdraw the excess contributions from 2021 + 2022 and not any earnings. Based on @fanfare , I have already past the deadline to withdraw by 2023 so I believe I will be also incurring a 6% penalty for 2023 as well. 

Level 15
Jan 21, 2024 6:53:26 AM

1 yes

2 yes

 

if you did not file 2023 yet there would be no reason to amend.

there is never an early withdrawal penalty for taking out your contributions.

removal resolves the excess and ends the penalty.

 

you may be able to e-file 2022 1040-x after turbotax opens amendments,

since a few others have reported success with that (prior year amendment).

2021 will probably require paper filing.

You don't need a 1099-R for any of this.

You won't get a 1099-R until 2025.

 

 

@ww_94 

Level 1
Jan 21, 2024 12:59:05 PM

@fanfare 

 


if you did not file 2023 yet there would be no reason to amend.


 How do I pay the 6% penalty for 2023? Will Turbotax ask if I need to fill out a 5329 Form when I complete 2023's tax return this  year? 

 


You don't need a 1099-R for any of this.

You won't get a 1099-R until 2025.


I tried amending my 2023 tax return on the desktop TurboTax and there's a section asking for a 1099-R. How would I get the section on filling out a 5329 Form? 

 

Level 15
Jan 21, 2024 3:05:29 PM

if you use the desktop you should be able to open 5329 in Forms mode and fill it out.

or

if you amend 2022 and import that into 2023 filing, it should bring along the Form 5329

-

Use the  IRS "Make a payment" page to pay your tax, or send a check.

 

@ww_94 

Level 15
Jan 21, 2024 3:16:18 PM

If you find yourself struggling with the Turbotax amend process it would be easy enough to get the required forms in editable PDF from the IRS website and fill them out manually.

 

You will need a paper copy of the original returns.

 

@ww_94 

Level 1
Jan 21, 2024 11:28:30 PM

@fanfare  Thank you so much for your help. This was extremely helpful.

 

To confirm:

 

1. I'll only need to amend 2021 & 2022 Tax Returns with a 5329 showing the 6% penalty. I won't need to attach a 2024 1099-R since the withdraw of excess contribution was made long after the 2021 & 2022 tax (and extended) deadline. 

2. For 2023's Tax Return, I should have a 5329 Form filled out with the 6% penalty when I enter my excess contributions from previous years (2021 + 2022) that had not yet been taken out by end of 2023.  I won't need to attach a 2024 1099-R for the same reasons as above + the 2024 1099-R does not apply to removal of any excess contributions made in 2023. 

3. For 2024's Tax Return, I believe the excess contributions from 2023 will roll over to 2024 (as #18 on Part 1V of 5329) but this should be balanced out by the 2024 1099-R I receive. I shouldn't be taxed on the 2024 1099-R distribution and I shouldn't have a 6% penalty. 

Level 15
Jan 22, 2024 11:28:52 AM

You got it.

2021 will show the first excess, 2022 will show the first and the second excess.

New Member
Jan 24, 2024 8:00:07 AM

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

Level 15
Jan 24, 2024 8:07:51 AM


@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.

Level 1
Feb 11, 2024 11:41:54 PM

@fanfare Do state taxes need to be amended as well as part of excess IRA Contribution (I'm in CA)?

I tried to amend my 2021 Tax Return on Turbotax Desktop and needed to complete the CA State Return as well (It ended up being a $0 balance/refund for state). 

 

I also got an error saying that the 2021 filing was closed so I will need to mail in amended return. When I download all the forms for federal I get a 1040-X (Amended Return), 1040, Schedule 2, Schedule B, 5329, and a 8995 Form. Should I be mailing all of them? 

 

I also have a form for a certificate of electronic filing with a date back in 2022 when the tax return was submitted. I had gotten an error in TurboTax when I had tried to set the amend date of 2024. Is this fine? 

 

Thank you! 

 

Level 15
Feb 12, 2024 7:00:45 AM

How to file: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.

Include any new/corrected document only if it shows federal tax withheld, and include in order only those Sequence Numbered tax forms and Schedules that changed or were added due to your amendment.
Attachment Sequence Number is on all the forms and Schedules that come after 1040.

If you are using TurboTax you have to do this by visual comparison. The program won't break out those pages for you. 
---
If any forms specify an attachment, put all those attachments at the end in the same order as the forms they go with.
---
Mail to the address shown for your location in the most recent Instructions for Form 1040-X.

--

If your CA tax did not change you don't have to amend.

 

@ww_94 

Level 1
Feb 13, 2024 8:05:09 PM

I'm actually unsure about the CA Tax Return. It shows 0 because I didn't end up explicitly changing anything. Do you need to amend the State Tax Return for Excess Roth IRA contributions?  I couldn't find a clear answer or source online. 

Expert Alumni
Feb 21, 2024 10:33:31 AM

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

Level 1
Mar 17, 2024 1:24:25 PM

@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

Expert Alumni
Mar 19, 2024 8:14:48 AM

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)

Returning Member
Mar 26, 2024 3:59:20 PM

@fanfare   

@fanfare  Have similar situation with ww_24 regarding excess ROTH contribution made in 2021.   Have been following on your responses which have been very helpful – thank you!

My case: 

  1. 2021 1040 was prepared by an independent practitioner.  No 5329 was reported.  
  2. Haven't filed 2023 tax return yet and using Premier edition of TT
  3. Plan to request withdrawal of 2021 excess ROTH contribution by Apr-15, 2024 (tax due date)
  4. Have satisfied the 5-year rule for ROTH account (opened in 2019) if this matters.

Questions: 

  1. How is Form 5329 created to accompany 2023 1040?   (Planning to manually file for amended returns for 2021 and 2022 and attach the new Schedule 2 and Form 5329).  
  2. This 2024 withdrawal will be reported on Form 1099-R in 2025.  Do we need to report this on 2024-1040?  Will the 2021 excess contribution resolve itself with the amended returns and payment of the 6%/year penalty?

Thank you so much!

 

 

Level 15
Mar 26, 2024 5:37:38 PM

The "tax due date" for a 2021 excess contribution is Tax Day 2022.

That option is no longer available to you.

Your excess has been in the Roth IRA for three full years going on four.

------

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(s) will be needed supplying Form 5329 since there is a 6% penalty per year on excess contributions .
Any earnings stay in the Roth account.

.--

If you distribute the excess now, you willl resolve the issue on your 2024 tax return.

@3D-Q 

Level 15
Mar 26, 2024 6:50:53 PM

@3D-Q 

 I see from your post you are planning to do as I stated above.

Yes you will have to file Form 5329 with your 2024 tax return.