@arhoton wrote:
For Roth, earnings are always taxed when you withdraw them but contributions aren't. In this case he stated he did not withdraw earnings for 2015-2017 only excess contributions. So while he will have accrued penalties as previously described. I don't see something that would trigger more taxable income for those years as that is money that has already been taxed. Exception would be for his 2018 contribution when he caught the entire issue and he withdrew it AND the contributions prior to filing time. Would a 2018 amendment be all that is needed to address the taxable earnings and penalty? That is assuming you can indeed file a 5329 by itself couldn't he do that for 2015, 2016, 2017. What am I missing?
After the due date has passes, only the excess contribution need be removed, the earnings stay in the IRA. Earnings are only removed if with the excess as a return of contribution withing the time limit to remove it. Paying the 6% penalty on the excess allows the earnings to stay in the IRA - see IRS Pub 5909B.
Since nothing else on the original tax return is changing, the stand-alone 5329 will properly report the penalty. That must be file for each year. You can amend if you want - it will not hurt but the software is not longer available.
As suggested above, I would see a tax professional who could possible get a compromise with the IRS.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
