Retirement tax questions

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@KREC wrote:

I have a few additional questions. As previously mentioned I filed the 2018, 2019, and 2020  5329 forms each year with each return and paid the 6% penalty each year, so

 

As I understand things:

 

I take distribution on the remaining excess of $1660 before the end of 2021 (no earnings), financial firm should issue a 1099R with code J in box 7 and I will need to fill out a 5329 with my 2021 return which will zero out any further 6% penalties. No other taxes or penalties due.

 

My financial firm stated the following which I don’t quite understand since this is a Roth not a Traditional IRA:

 

1. The excess contribution being withdrawn cannot be deducted or reported as a contribution for the year made. This may necessitate amending a tax return.

 

2. If the total contribution made to an IRA for the year is more than the maximum contribution limit in effect for the year the excess amount is generally includible in gross income.

 

Are there any other actions I need to take with regard to prior tax returns? As mentioned before I have already filed 5329’s and paid 6% each year.

 

Thanks

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If the remaining excess is removed before the end of 2021 then no 2021 5329 is filed since there is no excess.

#1)  Roth contributions are never deductible and are not reported on a tax return at all. 

#2)  Makes no sense.  As you already know and excess is simply removed and if not removed then it is subject to the 6% penalty.    When it is finally removed then it is  not taxable because you are just removing your own prior contribution which is never included in income.    You already paid the 6% penalty so the earnings do not get removed which would be included in income if timely removed (by the time limit) which you did not do.

Since you filed prior years 5329 form then no other action is needed.