- over-contribution for the current tax year
return of excess contribution:
before tax filing date including extension: positive earnings allocable to the excess are included in income on 1040 Line 4b for the year of the contribution. negative earnings are ignored; in any case, for purposes of basis, consider the original requested amount as returned.
You must have a) filed by tax day, or b) requested an extension of time to file by tax day to take advantage of the Oct 15 deadline.
positive earnings removed are no longer penalized 10% if you are under age 59 1/2. (eliminated in 2023)
- over-contribution for the prior tax year(s)
after tax due date including extensions: you distribute the excess amount being carried forward on 5329,
(or offset it with currently allowed contribution) .
An amended return will be needed supplying Form 5329 since there is a 6% penalty per year on accumulating excess contributions .
Earnings stay in the Roth account.
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Consult your custodian to obtain the correct removal form for each case.
@dperrett1
