For 2022: Amend and report the excess and pay the 6% penalty.
For 2023: Amend. If she was eligible (had earned income) and did not contribute, then part or all of the excess can be applied to her 2023 eligibility, which will reduce or eliminate the excess amount. If she had at least $4114 of earned income in 2023, that will clear it up. You need to amend 2022 first, so you can use the information from form 5329 to amend the 2023 return. And do both these things before filing the 2024 return, because each set of figures flows to the next return.
For 2024: If she had no excess after 2023 (by applying the 2022 carryover to her 2023 eligibility), then just file 2024 normally. If there is still some excess in 2024, contact the plan to remove it. (It won't be all $7000. If she did not work at all in 2023, the excess will be at most $4114, because the $4114 excess from 2022 will be applied first, making her remaining 2024 eligibility $2886.) But, she will have full eligibility in 2024 as long as she earned at least $4114 in 2023.
