File form 5329 for excess Roth IRA contribution

[claireliuqqqq]

In 2023, I found that I mistakenly contributed to Roth IRA account (I thought I was contributing to traditional IRA)

• $6000 in 2020
• $6000 in 2021
• $2000 in 2022
• $2000 in 2023

So in 2023, I did the following:

1. Filed 2022 tax with $4000 as Traditional IRA contribution (I didn't realized the mistake when I filed my tax);
2. Recharacterized the latest $4000 Roth IRA contributions into $2000 2022 and $2000 2023 traditional IRA contribution ;
3. Took out all the 2020 and 2021 contribution (there's no gain on these contributions);
4. Filed form 5329 for 2020, 2021, 2022, the penalties were $360, $720, $720.

Now in 2024, I received all the 1099R for the distributions happened in 2023. According to the 1099R instruction, I need to 

1. Report the recharaterization of 2023;
2. Amend 2022 tax return to report the 2022 recharacterization;
3. For the distribution related to 2020 & 2021 excess amount, based on i8606 instruction, it should be nontaxable and I need to "Include the total amount distributed on 2023 Form 1040, 1040-SR, or 1040-NR, line 4a; and attach a statement to your return explaining the distribution."

I want to check if my understanding is correct? Also, I didn't receive any letters from IRS after I mailed form 5329, nor does my IRS online account show any balance due. How do I confirm if the forms has been received and processed? Do I need to resend the forms this year?

Thank you so much in advance!

[DanaB27]

On your 2023 tax return

To report the recharacterization of the Roth contribution for 2023:

1. Click on "Search" on the top right and type “IRA contributions” 
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Answer ‘Yes” on the “Roth IRA Contribution” screen
5. Answer “No” to “Is This a Repayment of a Retirement Distribution
6. Enter the Roth contribution amount 
7. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount (no earnings or losses) on the next screen.
8. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
9. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" if you are thinking about doing a backdoor Roth. Otherwise select "No". (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible)

To enter the Form 1099-Rs (you can ignore 2023 Form 1099-R with code R):

1. Click on "Search" on the top and type “1099-R” 
2. Click on “Jump to 1099-R” and enter all your 1099-Rs
3. Click "Continue" on the "Review your 1099-R info" screen after entering all Form 1099-Rs
4. Answer all the questions and make sure you enter the net contributions prior to 2023 on the "Enter Prior Year Roth IRA Contributions" screen
5. On the "Do you have any Excess Roth Contributions" answer "Yes"
6. On the "Enter Excess Contributions" screen should show the excess contribution from 2020 and 2021 (this will be resolved by entering the Form 1099-R).

On your 2022 amended return

You will enter the recharacterization when you enter the contribution to the Roth IRA  for 2022:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”
5. Answer ‘Yes” on the “Roth IRA Contribution” screen
6. Answer “No” to “Is This a Repayment of a Retirement Distribution
7. Enter the Roth contribution amount 
8. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount (no earnings or losses) on the next screen.
9. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
10. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" if you are thinking about doing a backdoor Roth. Otherwise select "No". (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible)

You will get a 2023 Form 1099-R  for the recharacterization with code R-Recharacterized IRA contribution made for 2022 and this belongs on the 2022 return. But a Form 1099-R with code R will do nothing to your return. You can only report it as mentioned above. Therefore, you can ignore the Form 1099-R with code R.

To confirm you sent Form 5329 by itself? Did you pay the penalty? You should contact the IRS to inquire about it. Individuals: 800-829-1040, 7 a.m. to 7 p.m. local time. Please see IRS Let us help you for more details.