Scenario:
Due to various credits and income limits, as well as a large spousal income spread, my spouse and I decided to file married filing separately for TY2020. Just the way the math worked out, and we were tax advantaged to do so.
However, while filing, we neglected and TT didn't flag our maxed out Roth contributions ($6k each) that were already contributed for the year. So these funds have been in our Roth accounts since 2020.
Working the joint/seperate numbers this year, we now realize that were were ineligible due to filing status and income limits to contribute above $0 to Roths in 2020.
What is the best way to correct this? It seems we need to 1) withdraw funds from accounts, and 2) account for 6% penalty (and maybe 10% unqualified withdrawal). TT2020 has an option to report excess contributions for this year (2021) or any previous year which generates form 5329. Without entering the year in which these were contributed in excess, how is TT calculating it and how should I proceed. Will I need to amend my 2020 taxes before filing 2021? TIA!
