Hello,I recently discovered that I accidentally over-contributed to my Roth IRA accounts. In 2021, I contributed $6,000 to both my Charles Schwab and Fidelity Roth IRAs—without realizing I had already maxed out with the first contribution. This means I exceeded the annual contribution limit by $6,000.I’ve since contacted Schwab to remove the $6,000 excess contribution along with the earnings. However, since the excess remained in the account for multiple years, I understand I may owe a 6% excise tax for each year the excess contribution had been sitting in my account.Here’s what I think I need to do, and I’d appreciate any confirmation or corrections:File amended returns (Form 1040-X) for tax years 2021, 2022, 2023, and 2024.Include Form 5329 for each of those years to calculate the 6% penalty.Pay any penalties due.My questions are:Am I missing any steps or forms in this process?Do I need to report the earnings on Form 5329, in addition to the excess contribution?Should I add the excess contribution and excess earnings back to my adjusted gross income on Form 1040-X?For this year (2025), do I need to report the removal of earnings, and how would I do that?I read that the IRS may waive the penalty in some cases if I provide a reasonable explanation. Has anyone had success with this, and how should I go about requesting the waiver?Any guidance or shared experience would be greatly appreciated!

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jliangsh

Level 3

Solved

Need Help Reporting Excess Roth IRA Contributions from Previous Years

Forum|Forum|11 months ago
July 14, 2025
2 replies
36 views

Hello,

I recently discovered that I accidentally over-contributed to my Roth IRA accounts. In 2021, I contributed $6,000 to both my Charles Schwab and Fidelity Roth IRAs—without realizing I had already maxed out with the first contribution. This means I exceeded the annual contribution limit by $6,000.

I’ve since contacted Schwab to remove the $6,000 excess contribution along with the earnings. However, since the excess remained in the account for multiple years, I understand I may owe a 6% excise tax for each year the excess contribution had been sitting in my account.

Here’s what I think I need to do, and I’d appreciate any confirmation or corrections:

File amended returns (Form 1040-X) for tax years 2021, 2022, 2023, and 2024.
Include Form 5329 for each of those years to calculate the 6% penalty.
Pay any penalties due.

My questions are:

Am I missing any steps or forms in this process?
Do I need to report the earnings on Form 5329, in addition to the excess contribution?
Should I add the excess contribution and excess earnings back to my adjusted gross income on Form 1040-X?
For this year (2025), do I need to report the removal of earnings, and how would I do that?
I read that the IRS may waive the penalty in some cases if I provide a reasonable explanation. Has anyone had success with this, and how should I go about requesting the waiver?

Any guidance or shared experience would be greatly appreciated!

Best answer by Opus 17

@Opus 17

Thank you so much for your detailed reply and step-by-step instructions. I truly appreciate it.

I have two follow-up questions:

Q1: On Form 5329, I understand that I need to report the carryover excess from 2021 in Part IV: Additional Tax on Excess Contributions to Roth IRAs. However, I’m wondering if I also need to report the earnings from my 2024 excess contribution in Part I: Additional Tax on Early Distributions. My understanding is that since the excess contribution was timely removed before October 15, 2025, it would not count as an “early distribution,” so I would not need to complete Part I of Form 5329. Could you please confirm?

Q2: On Form 1040-X, as you mentioned, lines 1, 5, and 6 have changed based on the differences between the original and amended 1040. For line 10, Other Taxes, my understanding is that this will only include the 6% penalty from the carryover excess contributions from 2021, but not the 10% penalty for 2024 early distributions (again, since it was timely removed, I assume it would not be considered an early distribution). Could you clarify if I'm understanding this correctly?

Thank you again for your guidance!

@jliangsh wrote:

@Opus 17

Thank you so much for your detailed reply and step-by-step instructions. I truly appreciate it.

I have two follow-up questions:

Q1: On Form 5329, I understand that I need to report the carryover excess from 2021 in Part IV: Additional Tax on Excess Contributions to Roth IRAs. However, I’m wondering if I also need to report the earnings from my 2024 excess contribution in Part I: Additional Tax on Early Distributions. My understanding is that since the excess contribution was timely removed before October 15, 2025, it would not count as an “early distribution,” so I would not need to complete Part I of Form 5329. Could you please confirm?

Q2: On Form 1040-X, as you mentioned, lines 1, 5, and 6 have changed based on the differences between the original and amended 1040. For line 10, Other Taxes, my understanding is that this will only include the 6% penalty from the carryover excess contributions from 2021, but not the 10% penalty for 2024 early distributions (again, since it was timely removed, I assume it would not be considered an early distribution). Could you clarify if I'm understanding this correctly?

Thank you again for your guidance!

Just read the form and the instructions. Your 2024 form 5329 reports the carryover from 2023. (And 2023 reports the carryover from 2022, and the 2022 form reports the carryover from 2021). There is nothing on form 5329 about adding earnings. The 6% penalty is meant to offset any earnings.

When you timely removed the 2024 excess contribution of $3000 plus those earnings, they are reported using a 1099-R with codes P and J as I described. The earnings that are removed when you timely remove an excess contribution are not subject to the additional 10% penalty for early withdrawal. This is a law change in the 2021 SECURE act or maybe the 2022 SECURE 2 act. The earnings that you remove when you make a corrective distribution are not subject to the 10% penalty.

Line 10 would include all extra taxes from form 5329. But you will only be completing Part IV, and not any other parts.

fanfare

Level 15

For 2021 you can no longer remove the ccntribution plus earnings without penalty.

-----

after tax due date including extensions:

you distribute the excess amount being carried forward on 5329,
(or offset it with currently allowed contribution) .
Amended return(s) will be needed supplying that Form 5329 since there is a 6% penalty per year on accreting excess contributions .
Earnings stay in the Roth account.

Consult your custodian to obtain the correct removal form for this case.

By removing now (2025) your last penalty will be on 2024 tax return.

You can't get a waiver on the penalty for this scenario.

@jliangsh

fanfare

Level 15

If you have an available $4,000 contribution unused in any of those years, you can resolve the issue there and then by applying that amount. See Form 5329.

@jliangsh

Opus 17

Level 15

2021: file an amended return, report the excess contribution on form 5329 and pay the 6% penalty

2022: file an amended return, report the ongoing excess on form 5329 and pay the 6% penalty

2023: file an amended return, report the ongoing excess on form 5329 and pay the 6% penalty

2024: file an amended return, report the ongoing excess on form 5329 and pay the 6% penalty

2025: It is too late to use the special procedure to remove excess plus earnings. You just have a regular withdrawal of whatever dollar amount. When you report that withdrawal, it will also go on form 5329 and clear the ongoing excess balance. The withdrawal itself follows the normal Roth IRA rules and it will not be taxed as long as the withdrawal is less than your combined historical contributions.

Opus 17

Level 15

As @fanfare noted, if you contributed less than the maximum in any year since 2021, that can also be used to reduce the excess that you carry forward, that will all be accounted for on form 5329.

"I read that the IRS may waive the penalty in some cases if I provide a reasonable explanation."

I think that is unlikely here. What you would be thinking about is if you missed the 2022 deadline to remove the 2021 excess due to a family emergency or other situation. If you doubled your contribution for 2021 due to some confusion, a mixup with your finances, etc., you might be able to waive the penalty for 2021 if you have a good story, but I don't know if you can extend that for 5 years. Eventually you have to be responsible for your own actions.

To request an abatement of the penalty you would use form 843. You file this on your own, it's not included with a tax return. And you would not be able to file this until after you filed all the amended returns and pay the penalty.

https://www.irs.gov/forms-pubs/about-form-843

Note, that if you file amended returns showing that you owed $360 for 2021 (due April 15, 2022), $360 for 2022 (due April 15, 2023) and so on, and you pay those taxes, the IRS could come back and assess late fees and interest backdated to the date the payment was due. That would be another opportunity to request a waiver or abatement of the penalty.

My suggestion would be to pay the $360 for 2021-2024, wait and see if you get assessed late fees, and then apply for a waiver/reduction all at once. The IRS will usually forgive late fees for first-timers, but they can't waive the interest. I think you will need a good story to also get the base 6% penalty reduced. But good luck.

jliangshAuthor

Level 3

Thank you. I didn't see your reply until just now. This is very helpful. I will pay the 2021-2024 penalties as you suggested and see if there are late fees/interest.

If you could let me know what I should do for tax year 2025, I would be very grateful. Thank you.

@Opus 17