I'm just going to recap for my own mentals and to maybe help anyone else who runs into this or a similar problem in the future.
Me
1. File amended 2023 (wait to step 4) according to the 1099R received for me. I will need to pay taxes, through the amended filing, on the earnings of the withdrawal.
2. Because the earnings will cause a lower Roth IRA limit, I have a new excess contribution.
3. Address this by removing it in 2024 (the subsequent year). Unfortunately this will cause a 6% fee on the "new" excess contribution.
4. This will be paid through a 2023 5329, showing the sum of $130 in line 23 and line 24.
5. Calculate additional tax and pay it along with the amendment.
6. Also file 2024 5329, putting the 130 in line 18, then the distribution (taken before April 15 2025) in line 20, which should result in -0- from lines 22-25.
5. Case closed.
Spouse
1. Do NOT include 1099R in 2023 amendment because the withdrawal happened after the 2023 filing deadline. You will need to file a 2023 5329, however.
2. File 2024 1040 with 1099R as it is issued.
3. File 5329 for both 2023 and 2024. This means that for the 2023 amendment, form 5329 (year 2023) will include your excess contributions in line 23. Fill out the form, and see the calculations for the 6% tax.
4. Include whatever additional taxes are needed in your 2023 amended return (1040x)
5. For 5329 (2024) include the excess (now on 2023 5329 line 25) in line 18. Then fill out the rest of the form as instructed, making sure to include the distribution you took in line 20.
6. If this is done correctly, you should have a -0- in lines 24 and 25, meaning no more excess contributions.
7. Case closed.
N.B. Will also need to file 2024 form 8606 (one per person, per instructions) to clear up, both, the $130 distribution for me and the $2000 for wife.
@fanfare
@DanaB27
