dmertz
Level 15

Retirement tax questions

For each year 2020 and 2021, all you have to do is file 2 Forms 5329 showing the excess contribution and Form 1040-X showing the additional tax that you mentioned, no other changes and provide explanation that you are paying the penalties for these excess contributions.  Your 2022 tax return (which I assume you have not yet filed) will show any taxable gain required to be distributed with the returned contributions made for 2022 and a Form 5329 for each of you showing each individual's $14,000 of excess contributions carried in from 2021 along with the $840 penalty for each of you.

 

The 2023 Forms 5329 that you will file next year file will show the distributions of $14,000 for each of you, entered via the Forms 1099-R that you will each receive for these distributions, reducing the excess carried into 2023 from 2022 to zero, eliminating the excess contribution penalty for 2023 and beyond.