dmertz
Level 15

Get your taxes done using TurboTax

You can make applying the excess to 2021 be an option by obtaining a return of part of your 2021 contribution from your Roth IRA equal to the amount of the excess.  This may or may not make sense depending on the amount of earnings required to be included in the distribution.  The earnings on the returned portion of the 2021 contribution will be subject to ordinary income tax and, if you are under age 59½, to a 10% early-distribution penalty.  With this portion of your 2021 contribution returned you'll have room to apply the excess from 2020 as part of your 2021 contribution.

 

Otherwise, you'll have the 6% penalty for 2021 on the excess from 2020 (as you also had on your 2020 tax return) and you can apply the excess as part of your 2022 Roth IRA contribution.  You'll simply make your new contributions for 2022 be less than the maximum by the amount of the excess that you'll be applying to 2022 and prepare 2022 Form 5329 accordingly.