Excess Roth contribution from 2 years ago

Forum|Forum|6 years ago
July 6, 2020
5 replies
29 views

I'd over-contributed to my Roth IRA in 2017 and paid the 6% excise tax when I filed my 2017 and 2018 taxes. Looking back, I should've corrected this earlier. What are my options now? I haven't filed my 2019 taxes yet.

1. Can I still recharacterize the contribution as a Traditional IRA contribution for 2017?

2. If not, my understanding is that I can withdraw the excess contribution but leave the earnings in the account. In this case, what would I report in my 2019 taxes?

dmertz

Level 15

1. FAR too late to recharacterize. The last possible date for doing so was October 15, 2018.

2. Correct. Assuming that the excess cannot be applied as part of a Roth contribution for 2018, 2019 or 2020, the excess-contribution for 2020 and beyond can only be eliminated by making a distribution equal to the amount of the excess, with no adjustment for gain or loss. The distribution will not be taxable because it will be a distribution of your contribution basis. Except for being able to apply the excess as part of a Roth IRA contribution for 2018 or 2019, nothing can be done now that will eliminate the penalties on this excess for 2018 or 2019.

dmcy22Author

Level 2

Thanks! You're right in that I'm not eligible to apply the excess as part of a Roth contribution or 2018 or 2019.

Are these the correct steps then?

1. Withdraw excess contributions from my brokerage (leave any gains in the account)

2. Include the fact that I withdrew the excess in my 2019 tax filing

3. Optional: Contribute to a traditional IRA for 2019

4. When I receive the 1099-R in January 2021, no need to take action

One other question: Do I need to amend my 2017 tax filing? If so, is the deadline also July 15?

dmertz

Level 15

Regarding 1 though 4, that's correct. Regarding your 2017 tax return, you said that you've already reported the excess contribution and paid the penalty with your 2017 tax return, so there is nothing to amend.