@jliangsh wrote:
@Opus 17
I now have a few questions about the 2024 amended return:
Q1: On Form 5329, I’ll still owe the 6% penalty from 2021, but I shouldn’t owe a penalty on the 2024 excess contribution since I removed it before the extended deadline. However, on 5329, do I still need to report the 2024 earnings (which are taxable) under Part I: Additional Tax on Early Distributions? From what I see in other posts, Line 1 (Early distributions includible in income) and Line 2 (Early distributions included on line 1 that are not subject to the additional tax) need to be filled out, but I'm not sure.
Q2: If I understand correctly, because the 2024 earnings are taxable, I need to include them in the Form 1040-X Tax Liability section, Line 10 (Other taxes). The total would be the amount TurboTax calculates from the 2024 earnings PLUS the 6% penalty from 2021. Am I thinking about this correctly?
Q3: When filing the amended 2024 return, which forms should I include? I know I need Form 1040-X and Form 5329, but do I also need to include Form 1099-R? If so, should I just need to fill out Line 1 (total amount distributed), Line 2 (earnings), and Line 7 (codes J and P)?
Thank you very much for your guidance!
I can't tell if you are using software or doing this manually.
If using software, report that for 2024 you contributed $10,000. When the program says you have $3000 excess, will you remove it by April 15, answer yes. (Because October 15 is also allowed as long as you filed your original return on time, or had an extension, but Turbotax may not show that on screen). Then, enter a 1099-R as income, for the amount that the trustee sent as excess contribution plus attributable income. Enter the entire withdrawal as box 1 (let's estimate $3500) and the earnings part in box 2a (let's estimate $500). Use code "P" and "J" in box 7. Don't try to create a "substitute 1099-R", just enter a 1099-R as if you had actually received it.
If you are preparing everything manually, then
Q1. Report the carry over excess $6000 on form 5329 line 18. You have no excess contributions for 2024 because you timely removed them, so line 23 will be zero. Line 24 should be $6000 and Line 25 should be $360.
Q2. You have to prepare a new corrected 1040 first, so you know what to write on the form 1040-X. On form 1040, the total amount of the corrective distribution ($3500 in my example) is reported on line 4a, and the taxable amount ($500) is reported on line 4b. Then do the math to complete the form 1040 including all the other deductions and credits that were on the original (which includes also the new form 5329 if you did not have one before). After you have a correct form 1040, compare the old and new 1040 to determine what goes on the 1040-X. My rough estimate is that
- Line 1 your AGI will be higher by the amount of taxable earning (difference between old and new 1040 line 11)
- Line 5 taxable income will be higher by the amount of taxable earnings (difference between old and new 1040 line 15)
- Line 6 Tax will be higher by the amount of tax on the earnings (difference between old and new 1040 line 16)
- Line 10 Other taxes will have the $360 penalty from form 5329.
Q3. See the instructions for form 1040-X. You include the 1040-X (make sure you explain each change in Part II. Such as, "Taxable portion of excess Roth IRA contribution that was timely removed" for line 1 and line 5, "From the tax tables" for line 6, and "See form 5329" for line 10.
Include the new form 5329 if you did not include it originally.
Do not include the 1099-R for the corrective distribution, this is a "fake" that is used by the software to get the right answer, but it does not exist and you don't send it to the IRS. You would only send a real 1099-R if it had withholding showing because you need to prove the withholding so it adds to your refund calculation. If there is no withholding, you don't include it (and it doesn't exist anyway).
