@DanaB27 - this has been an informative thread. I have a similar situation. Hoping you can verify the below are the correct action steps.
In calendar 2020, $7000 Roth IRA contributions were made (age > 50+). In January 2021, an additional contribution of $3500 was made (in error) to the same 2020 Roth IRA, now causing a total of $10,500 in 2020 contirbutions. The tax return was filed.
Calendar year 2021, only $3500 in Roth IRA contributions were made to 2021 Roth IRA.
In March 2022, the error was discovered. The 2021 tax return is in prep mode, it has not yet been filed.
This is what I have done so far to correct the error. Does the following seem correct or am I missing something?
1. contacted broker and have removed the excess $3500. When the check arrives, I'll turn around and make a $3500 Roth IRA contribution in March 2022 for a calendar 2021 contribution to equal $7000 total contributions for age 50+.
2. I returned to TT desktop 2020 and have created an amended 1040X return, including F5329 showing the $3500 as removed on line 25 and generating a $210 penalty showing on Schedule 2. (first year of excess) This return will be paper filed. There were a couple other corrections made still resulting in an overall add'l refund.
3. In TT 2021 I opened up Personal>Deductions & Credits> Do you have any Excess Roth Contributions... in 2021 or any previous year? yes> enter $3500> enter YE 21 value of Roth.
This creates F5329 for 2021 tax return,
- line 18 $3500 excess cotnribution form line 24 of 2020 F5329.
- Line 21 $0.
- Line 22 $3500 for 'prior year excess contributions'
- Line 23 - blank (appropriate since no excess 2021 contributions)
- line 24 - $3500 for 'total excess contributions'
- line 25 - $210 penalty. (second year of excess was calendar year 2021)
total penalties = $420
Next year in 2023 when I create my 2022 tax return, there will be no more penalty because the excess was removed prior to the due date of the return 4.18.22.
The 1099R codes 'should' catch up with the F5329s and code P or 8 (?) should make it 'ok' I hope.
Does all this sound correct? am I leaving anything out?
Best to paper file this return too? or would e-file still be a good option?
TIA!
