Hello
In reviewing past tax forms for 2014, we realized that my husband accidently contributed $4000 to his Roth IRA that was intended to be put into his traditional IRA. Due to our MAGI - it was not allowed and is now considered an excess contribution. He made a non dedeuctible contribution of $1980 to his traditional IRA in 2014 as well.
My question- is it too late to amend our 2014 taxes and move the $4000 over to his traditional IRA as a non deductible contribution? (I believe the max contribution to a traditional IRA for 2014 was $5500 +$1000 catch up (he turned 50 in 2013) - so a total of $6500.
He contributed $5000 to his TIRA in 2015 and $0.00 in 2016.
If it is not possible to amend 2014, can we amend our 2015 taxes and move $1500 of the excess to his TIRA and then the balance to the 2016 taxes TIRA
I understand that we will have to pay the 6% penalty, but for what years? Up until the funds are allocated or all the way through 2022?
Also- what forms do I need to submit for amendment? Any and all help would be appreciated. This is keeping me up at night!
Thank you
It's many years too late to amend the 2014 tax return or to recharacterize the excess Roth IRA contribution to be a traditional IRA contribution instead. The only way to resolve the excess Roth IRA contribution is to be able to treat it as a Roth IRA contribution for some future year (perhaps 2016 or some later year if MAGI allowed) or to make a regular distribution of the excess now.
There is generally no statute of limitations on the penalty for an excess IRA contribution because Form 5329 is considered to be a separate tax return for this purpose and you would not have known to file this form to start the statute of limitations clock running. For each year that the the excess has been in the Roth IRA, beginning with 2014, Form 5329 must be filed to report the $4,000 excess and pay the 6%, $240 excess-contribution penalty. Assuming that there has been no year that the excess could have been applied, a $240 penalty will be owed for each year from 2014 through 2021 (a total of $1,920). The regular distribution in 2022 will resolve the excess so there will be no penalty for 2022 or beyond. Any earnings on the excess can remain in the account, so hopefully there has been good investment performance in the past and will be in the future to help make up for the penalty since those gains will be tax free once the Roth IRA is qualified by your husband reaching age 59½.
The Forms 5329 can be filed stand-alone since they have a signature block.