Form 5329 - 6% Additional Tax for mischaracterized Roth Conversion

[jbo1614]

On my 2018 Return is mischaracterized a Backdoor Roth "conversion" as a "recharacterization" and have been paying a 6% additional tax on line 25 of Form 5329 on my return since 2018 since they believe it is an excess contribution. I filed an amended 2018 return one year ago and at the time the IRS was way behind. My amended return showed as being received on their website, and then it disappeared a few months ago. When I finally was able to speak to a human there, they told me they lost my return and I needed to resubmit, which I did 6 weeks ago, but it has not appeared in their system yet. I am completing my 2022 return now and the additional tax it is once again showing up. Should I just leave it as is or can I delete that form from my return?  Also, will I need to file amended returns for all years since 2018?

[DanaB27]

Yes, if you didn't actually have an excess contribution and amended your 2018 return to show this then you will remove the excess contribution from prior years during the interview on your 2022 tax return:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Do you have any Excess Roth Contributions" answer "Yes"
5. On the "Enter Excess Contributions" screen delete the entry.

Yes, if you didn't have an excess contribution in 2018 then you don't have to pay the 6% penalty for the years 2019-2021. If the returns show the 6% penalty on Form 5329 part IV then you should file an amendment for those years.

[fanfare]

"Also, will I need to file amended returns for all years since 2018?"

you will if you want your penalty back.

delete that form 5329 from your 2022 tax return !

@jbo1614