Multiple years of Roth IRA excess contribution. How to report?

Forum|Forum|6 years ago
June 26, 2020
8 replies
25 views

I have a sticky situation here. There are some questions so thank you in advance whoever has the patience and kindness to help me.

I need to report excess contribution on Roth IRA and take penalties.

2014 excess contribution - contributed Jan 2014 - removed in June 2020 - 6% penalty for 6 years

2015 excess contribution - contributed Feb 2015 - removed in June 2020 - 6% penalty for 5 years

2016 excess contribution - contributed Jun 2016 - removed in June 2020 - 6% penalty for ? years

2017 excess contribution - contributed Feb 2017 - removed in June 2020 - 6% penalty for 3 years

2018 excess contribution - contributed Jan 2019 - removed in June 2020 - 6% penalty for 1 years

2019 excess contribution - contributed Jan 2019 - removed in January 2020 - no penalty

How do I calculate the number of years I need to take penalty? Esp. for 2016 and 2018. 2016 was contributed in June 2016. 2018 was contributed in Jan 2019.
Do I report them in each year’s year return by making tax amendments?
I am still waiting for 2016’s amendment result. What should I do with that year?
2014-2016 have passed the time frame for tax amendment. What should I do?
There is no 1099-R for these removals. Should I report anything on this year’s return and how do I do that in Turbotax?
How do I calculate penalty considering gain/loss from the excess contribution?

Not A Product Question

Best answer by macuser_22

#1) You must file a 5329 for for each year starting with a 2014 5329 part IV that would have the 2014 excess and the 6% penalty on that excess. For 2015 file a 2015 5329 with both the 2014 excess and 2015 excess so the 6% penalty will be for both. Likewise for each year 2017-2019 (the 2019 would have the total of 2019 excess and all prior years).

#2) You can amend, but the penalty will not affect anything else on the tax return so the 5329 can be mailed by itself.

#3) Just mail the 2016 5329

#4) The time limit is to amend for an additional refund. There is no statute of limitations of you owe additional tax.

#5) If you removed all the excess in 2020 then you will receive one of two 2020 1099-R forms in 2021. The prior years excess should be a normal distribution with a code J in box 7 or J1 if under age 59 1/2. The 2019 excess removed in 2020 should have a code JP in box 7 indicating a "return of contribution" and not as a normal distribution.

#6 Because you must pay the 6% for 2014-2018 then the earnings for those years are allowed to remain in the IRA and need not be removed or taxed. The financial institution should calculate and return the 2019 excess plus the earnings attributed to the 2019 excess and report the earnings in box 2a on the 2020 1099-R with the code JP - those earnings will be taxable income.

When entering the 1099-R's the interview will ask for prior years contributions not previously removed - include the total of ALL contributions including the excess contribution so the returned contributions will not be taxable income - only the 2019 earnings will be taxable.

macuser_22

Answer

Alumni - Champ

#1) You must file a 5329 for for each year starting with a 2014 5329 part IV that would have the 2014 excess and the 6% penalty on that excess. For 2015 file a 2015 5329 with both the 2014 excess and 2015 excess so the 6% penalty will be for both. Likewise for each year 2017-2019 (the 2019 would have the total of 2019 excess and all prior years).

#2) You can amend, but the penalty will not affect anything else on the tax return so the 5329 can be mailed by itself.

#3) Just mail the 2016 5329

#4) The time limit is to amend for an additional refund. There is no statute of limitations of you owe additional tax.

#5) If you removed all the excess in 2020 then you will receive one of two 2020 1099-R forms in 2021. The prior years excess should be a normal distribution with a code J in box 7 or J1 if under age 59 1/2. The 2019 excess removed in 2020 should have a code JP in box 7 indicating a "return of contribution" and not as a normal distribution.

#6 Because you must pay the 6% for 2014-2018 then the earnings for those years are allowed to remain in the IRA and need not be removed or taxed. The financial institution should calculate and return the 2019 excess plus the earnings attributed to the 2019 excess and report the earnings in box 2a on the 2020 1099-R with the code JP - those earnings will be taxable income.

When entering the 1099-R's the interview will ask for prior years contributions not previously removed - include the total of ALL contributions including the excess contribution so the returned contributions will not be taxable income - only the 2019 earnings will be taxable.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

macuser_22

Alumni - Champ

In addition, you can download blank 5329 forms and instructions for prior years here:

https://apps.irs.gov/app/picklist/list/priorFormPublication.html;jsessionid=pLJQIUKKcBlEegTdjkyR0uF5.20?value=5329&criteria=formNumber&submitSearch=Find

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

T

tdo061803Author

Level 4

These are all useful information. Thank you @macuser_22 @Opus 17

1. On Form 5329, should I use my current address or address at the time of filing?

2. Form 5329 instruction ask to include a check when mailing in the form. I don't have checks. I can pay online at IRS.gov. Should I pay online and include a copy of payment confirmation in each year?

3. How can I separate each year's Form 5329 when I mail them so IRS process all the years and don't get confused with all the paper?

Thanks again!!