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Retirement tax questions
Yes, you will have to file Form 5329 and pay a 6% penalty for each year the excess remains in the IRA (but it can't be more than 6% of the Roth IRA value). Please see Form 5329 Instructions and Prior year Form 5329 (to find 2018, 2019, 2020, and 2021 Form 5329).
For 2018 Form 5329 you will have to pay the 6% on the 2018 excess ($36).
For 2019 Form 5329 you will have to pay the 6% on the 2018 + 2019 excess ($72).
For 2020 Form 5329 you will have to pay the 6% on the 2018 + 2019 + 2020 excess ($108).
For 2021 Form 5329 you will have to pay the 6% on the 2018 + 2019 + 2020 + 2021 excess ($144).
For 2022 Form 5329 you will have to pay the 6% on the 2018 + 2019 + 2020 + 2021 excess ($144, but you might be able to apply some excess to 2022 since you only contributed $5,700 for 2022 and then the penalty will be less).
Yes, next year you can apply the excess to your 2023 Roth contribution limit to absorb the excess (if you are able to make contributions).
To calculate the 6% penalty on your 2022 tax return and possibly absorb some of the excess contributions in 2022 if your contribution isn't limited by your MAGI :
- Click on "Search" on the top right and type “IRA contributions”
- Click on “Jump to IRA contributions"
- Select “Roth IRA”
- On the "Do you have any Excess Roth Contributions" answer "Yes"
- On the "Enter Excess Contributions" screen enter the total excess contribution from 2018 + 2019 + 2020 + 2021 ($2,400)
- On the "How Much Excess to 2022?" screen enter $300 to apply to 2022 (assuming you are under 50).
Next year on your 2023 tax return:
- Click on "Search" on the top right and type “IRA contributions”
- Click on “Jump to IRA contributions"
- Select “Roth IRA”
- On the "Do you have any Excess Roth Contributions" answer "Yes"
- On the "Enter Excess Contributions" screen enter the total excess contribution from 2018 + 2019 + 2020 + 2021.
- On the "How Much Excess to 2023?" screen enter how much you want to apply to 2023.
Please see What happens if I made an excess Roth IRA contribution for additional information.
[Edited 3/8/2023 | 7:16 am PST]
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