Hi Community,
Looking for some expert help here to resolve some confusion please. I was previously advised to mail a separate Form 5329 for each of my son's Coverdells because I had excess contributions in 2021 and 2022. Those excesses were resolved and are no longer in the Coverdell accounts (I transferred the 2021 contributions to prepaid tuition plans and the 2022 contributions to a non-retirement investment account before 5/31).
Each form was populated with one of my son's names and SSN, and I signed each 5329 at the bottom as the custodian. Although the IRS cashed the checks that I wrote to cover the excess contribution penalties (a combined $158 penalty per son for both 2021 and 2022), the IRS sent a letter to my oldest son (who is 6 years old) indicating that my signature did not match my son's name on the form. The letter requests that my son sign a "Statement by Individuals or Sole Proprietors," or that he send in a copy of a power of attorney that allowed me to sign the form on his behalf.
How do I go about properly solving this issue? Are the separately mailed forms confusing the IRS and do I need to amend the 2021 and 2022 returns instead? If so, how?
Or are they expecting me to fill out the 5329 forms with my name and SSN and still sign it myself even though I am not the beneficiaries? I don't want my sons to be on the hook for future taxes as the beneficiaries since I think that is how the responsibility of the excess contribution tax is placed. If this is the proper course, how does the IRS know that the penalties apply to their accounts? Any help is greatly appreciated - thank you!
