There is a penalty for excess contributions at 6% per year. Hence the need for recharacterization. If the recharacterization occurs after the original filing deadline, then an amendment must be submitted. Therefore, the original filing includes the penalty. The amended return does not show the penalty.
e.g.
Excess contribution: $3,000
Amount recharacterized: $3,000
Amount transferred: $2500 with loss of $500.
Is the above correct? Or are the amounts of recharacterized vs transferred flipped?
In the above example, the penalty assessed would be $180. So in the original filing the the penalty was added to the taxes due. In the amended return, the penalty is gone and an additional refund is to be given for the said penalty amount.
The previous question was regarding the accrual of penalty over time. Therefore, would waiting till filing next year for the amendment when the 1099-R is issued cause the penalty to increment by 6%, meaning $180 due to waiting till 2022 to file or would the amendment resolve any penalties completely and just issue an additional refund as long as it's submitted within 3 years?
