@dmertz - I apologize for adding to this post in the middle - not sure how else to do it.
I made a Roth contribution in in 2018 for $6500. This year I realized I was only eligible for a partial contribution but removed the entire $6500.00 in June 2020.
I followed your instructions as below to amend the 2018 return:
When amending with 2018 TurboTax, simply enter the Roth IRA contribution under Deductions & Credits -> Retirement and Investments -> Traditional and Roth IRA Contributions. If the contribution is an excess contribution, TurboTax will automatically prepare Form 5329.
Turbo Tax calculated the excess to be $6060 (as I was in between the lower & upper limits) and prepared 5329 with this amount on line 23 & 24 with $364 as tax on line 25. I believe this is correct. However, in another post that I asked the question I was told that my excess should be noted as the entire $6500. Can you confirm which is correct - below is my question and their answer
Q - Even though I removed the 2018 contribution of $6500.00 in June 2020, based on my AGI I was still eligible to contribute $440 (so $6060 excess). On 2018 & 2019 Form 5329 line 18 the, I should only put the excess contribution correct? Even though I removed the entire $6500 I should not be taxed/penalized on the additional $440 removed, since I'm eligible to remove contributions anytime (I am under 59 1/2 and have had the account for > 5 years).
A) No. Your 2018 & 2019 excess was $6,500. An excess contribution penalty has nothing whatsoever to do with the normal tax on taking a distribution. Age makes no difference. What the 2018 & 2019 excess was has nothing to do with how much you are eligible to contribute in 2020. The 6% penalty *repeats* each year that the excess remains. It is a separate 6% penalty for 2018 & 2019.
If removed in 2020 then that is a 2020 distribution and removing your own contribution is not taxable reguardless of age.
