@acejeffery wrote:
Hello,
Thank you so much for the detailed response to my question. I contacted the brokage company of my Roth IRA, and was told that their system doesn't support applying the excess amount of contribution from a previous year to a later year, although allowed by IRS.
As I already contributed the full Roth IRA amount to 2020, 2021, 2022, and 2023, I wonder if there is anyway for me to applying this excessive amount from 2019 to 2024 tax year? As we are still ahead of the 4/15/2024 deadline for the 2023 tax year, is it possible for me to withdraw $898.70 from 2023, and apply the same amount from 2019 to 2023, instead of 2024? If so, do I need to consider any earnings or losses for the withdraw/distribution?
Thanks!
The overall situation is a bit odd since 2019 is past the statute of limitations, but on the other hand, this creates an ongoing problem where every subsequent return is also incorrect which extends the statute of limitations indefinitely. The straight-up by the book solution is to file amended returns for 2019, 2020, 2021 and 2022 that reports the excess and pays the 6% penalty. The IRS will likely send you additional bills for interest back-dated to the original filing deadlines (June 15, 2020 for the 2019 season, and so on). About 1/2% per month.
You are correct that for 2023, if you remove $899 before April 15, 2024 as a "return of excess contribution", then the 2019 excess will be "used up" and you will have no further penalties (Round up so you don't run into problems with the cents). However, when you remove the $899 of excess contributions, the trustee must also pay you the earnings attributable during 2023 on that $899 of excess contribution. Even though these earnings are going to be paid in calendar year 2024, they are taxable on your 2023 return. (The withdrawal of excess contribution is not taxable, the earnings are subject to income tax but not a 10% penalty.) To report the withdrawal of excess plus earnings on your 2023 return, follow these instructions.
To create a Form 1099-R in your 2023 return please follow the steps below:
- Login to your TurboTax Account
- Click on the "Search" on the top right and type “1099-R”
- Click on “Jump to 1099-R”
- Answer "Yes" to "Did you get a 1099-R in 2023?"
- Select "I'll type it in myself"
- Box 1 enter total distribution (contribution plus earning)
- Box 2a enter the earnings
- Box 7 enter P and J
- Click "Continue"
- On the "Which year on Form 1099-R" screen say that this is a 2023 1099-R.
- Click "Continue" after all 1099-R are entered and answer all the questions.
