Excess Roth IRA Contribution for 2022

Can I apply the excess 7k to my 2024 Roth IRA Contribution and pay the 6% penalty for 2022 and 2023?

• Yes, that is one solution. Probably the easiest at this point.

Or do I have to withdraw it and the earnings?

• No. And in fact, that procedure is not even allowed at this late date.

Do I file form 5329 for 2022, 2023 and an amended return for those years?

• Yes.

 

Do I need to do anything for 2024?

• You will have to tell Turbotax that you had an outstanding excess of $7000 from 2023, and that you made no contributions for 2024.  Turbotax will prepare another form 5329 that will show the excess is "used up" and no further penalty is owed. 

 

In fact, the Roth limit for 2024 is $8000 for over-50, assuming your income and other situations qualifies you for the full limit.  So you could contribute $1000 for 2024 and still have $7000 of room under the cap to use up the previous excess.

 

Also, this assumes that you made a full contribution of $7500 for 2023.  If you did not, then you could file an amended 2023 return to "use up" the $7000 excess against your 2023 limit.

 

And lastly, if you did make the maximum 2023 contribution of $7500, it is theoretically possible that you could perform the procedure to "remove an excess 2023 contribution" of $7000, which would leave you room to use up the 2022 excess in 2023.  You would still pay 6% on your amended 2022 return, but save the 6% in 2023 ($420).  Then you could re-contribute the $7000 as a 2024 contribution.  However, the deadline to do that is tomorrow (October 15), and only if you filed your original return on time or had a valid extension.  And the transaction has to settle by midnight tomorrow.  It is likely that your IRA custodian will need more than half a business day to settle the transaction, especially since October 15 is one of their busy times of year.  If you try it, and it doesn't go through, then you are back to where you are now in terms of excess and penalties, plus you will have removed $7000 from the account that you can't put back.  If you asked last week, I would say try it.  But now, I think it's probably too late, and the long term gains from leaving the money in the account (even though it will cost a penalty) outweigh the risk that if the money doesn't settle tomorrow, it becomes a regular withdrawal that can't be put back. 

Thank you!

Can I send both years amended taxes in the same envelope?

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@medav wrote:

Thank you!

Can I send both years amended taxes in the same envelope?

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I would not.

So I filed a amended returns for 2022 and 2023.  Mailed them separately and paid the penalties.

My 2023 amended return was processed and they sent me a refund of my payment.

My 2022 amended return is still being processed.

 

Do I need to resubmit my 2023 amended return after the 2022 is processed?

I'm confused as to why they refunded the payment.  I tried to call the number on the letter notifying me that the 5329 form was received, taxes adjusted and refund sent but its an endless loop of prompts and seems to be just for payments/refunds.

 

 

To clarify, when you submitted your 2023 1040-X, did it show a refund or payment due?

 

Applying the 2022 Roth IRA excess contribution to 2023 possibly qualified you for the retirement savings credit.

 

@DanaB27  The 2023 1040-X showed a payment due.  It doesn't look like I qualify for the retirement savings credit.

If the IRS made changes they usually will send you a notice. You can try to check your IRS Online account for individuals to see why the IRS issued you a refund.