Thanks to @KathyL and @fanfare for detailed and helpful responses. Since I have to pay 6% penalty on 2022 excess contributions, I was originally thinking, in my own little wisdom, about just doing forms 5329 (2022) for both me and my wife and hopefully be done with it as there was no other change for 2022. However, my broker thrown a caveat in this whole situation which has confused the heck out of me. My broker decided to withhold 10% of my wife's excess withdrawal as federal withholding. However, for mine, there was no withholding per the broker transection. So how does that change the game plan as the federal withholding for my wife will be reported on 1099-R in 2025. So, it makes it more confusing (just for me).
I do appreciate you all being patient with my questions as I am totally new to this and find the process overly confusing & stressful especially when breaking up growth/earnings etc. for different tax years. So any instructions broken up into steps as you would give to a 5th grader would be helpful. My questions are as follows:
Tax Year 2022:
1. So, under the circumstances, should I go ahead and do 5329 by itself (or amend existing return with 1040X as suggested by Fanfare)? which is preferred? How do I account for the tax withholding from my wife's 2022 excess contribution removal that would probably show up on my 1099-R in 2025.
2. Would my 2022 turbo tax help me walk through this process?
Tax year 2023:
My original plan was to amend 2023 before Oct 15, 2024 based on my recent removals (and not wait for 1099-R for me and my wife) using TurboTax (which I assume will generate 1099-R), because I was told that If I don't do it before Oct 15, 2024, IRS may penalize me with 6% or other penalties.
So, I continue to struggle with questions for tax year 2023 also which are as followings.
1. is it correct that I am subject to penalties etc. if I don't account for 2023 removals by amending 2023 tax return by Oct, 15, 2024? If so, what is the best recourse for 2023 tax year filings/amendment in the absence of 1099Rs that will be received next year in 2025.
2. Regardless of growth/income none of my tax liabilities change due to substantial short term/long term loss carryover on my taxes. Does this fact change anything for the process/filings, I have to do for 2023 taxes
2. For me there would be no age penalty for 2023 excess removals/gains however small removal of $207 from my wife's account may have small gains of $30-24 requiring me to pay 10% age penalty which will be under $10. Do I still have to do 5329 for her for that small amount?
3. Again, how can I do this with turbo tax. (step instructions would be appreciated). I wasn't aware that turbo tax allows for amended tax returns to be filed electronically but if it does for small fee, I will prefer to do that.
I thank you all for helping. Any instructions broken into steps would be appreciated.
