@Odin1970 wrote:
Thank you so much for taking the time to reply and thoughtful response I really appreciate it.
So my last question is, well more of a scenario (please let me know if this is viable).
Both my spouse and I complete F5329 forms for the tax years that we had the excess contributions and pay the 6%. For the 2025 filing we can mitigate the prior year contributions before 4.15.26 by pulling that money out, which would negate the penalty for 2025.
So the question now is, are the prior year excess contributions and their removal tied to the calendar year ending or the tax year filing date? If its the filing date, I can get get those contributions out so the 2025 6% penalty would not apply, if I am understanding the code correctly.
So now you've lost me. I thought you were going to amend to file jointly, in which case your Roth contributions might be allowable (depending on your income) and there would be no need to file any 5329s or pay any penalties.
If we are running the scenario where you remain with MFS for 2023 and 2024, you file amended returns to include form 5329 and pay 6% on the accumulated excess for each year.
For 2025, it is too late to use the special rule to remove excess before the filing deadline. That procedure would only apply to excess that was contributed in 2025. For the accumulated excess from 2023 and 2024, it is too late to use any special rules to remove it, and you have to include form 5329 again and pay the 6% on the accumulated penalty.
However, if you had new contributions in 2025, you could remove them before April 15. That would create space in the account that the accumulated excess could be applied to, which would reduce the amount to be penalized on the 2025 return. I described that above.
Any remaining excess can be removed in 2026 as a regular withdrawal, not a special withdrawal.
