SUMMARY: My 2023 Federal return is showing an excise tax on Form 5329 line 25 due to an excess Roth IRA contribution, even though no Roth contribution was made in 2022. Excess Roth contributions were actually made in both 2020 and 2021 and were later withdrawn along with the associated gains. Unfortunately this was incorrectly reported as I apparently misunderstood the interview questions. I amended the 2020 return in April of 2022 to fix this problem but even that is not correct as the associated gain was reported in Part I. It seems like I now need to file amended returns for 2020, 2021, and 2022?
Luckily I am now retired and have the time and inclination to study all the IRS instructions rather than depend solely on the interview process. But I also need some guidance from those with experience in this area. Do the community experts actually have time to get into this level of detail?
DETAILS: The problem originated in 2020 (age 65). On March 2, 2020 I made a contribution of $6,500 to my Roth IRA but later that year I received unexpected taxable income. This caused my modified AGI to exceed the limit of $139,000 and the contribution to become an excess contribution. I discovered this after submitting my 2020 tax return and immediately contacted the Roth IRA custodian to withdraw the excess contribution and associated gain, which occurred on June 25, 2021. I submitted an amended 2020 return but unfortunately TurboTax incorrectly reported it in Part I (Additional Tax on Early Distributions) rather than Part IV (Additional Tax on Excess Contributions to Roth IRAs) of Form 5329.
In tax year 2021 the same thing happened again due to further unexpected taxable income late in the year. On March 22, 2021 I made a contribution of $6,500 to my Roth IRA but later that year I received unexpected taxable income. This caused my modified AGI to exceed the limit of $139,000 and the contribution to become an excess contribution. On April 11, 2022, the Roth IRA custodian withdrew the excess contribution and associated gain. Part IV of Form 5329 (Part I was blank) showed an excess contribution on lines 18, 22 & 24 and the associated excise tax on line 25. The rest of Form 5329 was blank. I cannot tell if the amount shown on Form 5329 came from the 2020 or the 2021 excess contribution. I cannot find the small gain ($28) from the 2021 excess contribution anywhere in the return.
