Solved: excess Roth IRA contributions for multiple years.

michaeljordan198 · Mar 8, 2023 2:26:23 PM

the situation: 1) I am in my 30s and made excess Roth IRA contribution for tax year 2020, 2021, and 2022. 2) realized the error on March 2023 (have not filed 2022 tax return yet), and request the return of excess contribution without earnings/loss for 2020, 2021 and the return of excess contribution with earning/loss for 2022. questions regarding the amending 2020 and 2021 tax: 1) to amend 2020 tax, the only thing needs to do is to fill out the 5329 form in Part IV to pay 6% Penalty on the 2020 excess contribution (without earnings/loss), correct? 2) to amend 2021 tax, the only thing need to do is to fill out the 5329 form in Part IV to pay 6% penalty on both the 2020 and 2021 excess contribution (without earnings/loss), correct? questions regarding the 2022 tax (have not filed yet) 1) fill out 5329 form Part IV to pay 6% penalty on the 2020 and 2021 excess contribution (without earnings or loss). 2) after request the return of excess Roth IRA contribution for 2020, 2021 and 2022 to my IRA brokage, I will get only one 2023 Form 1099-R in early 2024, correct? if so, 3) should I use the 2023 form 1099-R to report only the earnings of 2022 excess contribution to 2022 tax return, not 2023 tax return? 4) what should be reported in 2023 tax return? (there is no federal nor state tax withhold from my IRA brokage for the return of excess contribution for tax year 2020, 2021 and 2022). 5) if my understanding is correct for 2022 tax return, three things need to be done as follows. A) pay the 6% penalty on 2020 and 2021 excess contribution B) Using 2023 Form 1099-R to report only the earnings of 2022 excess contribution as taxable income into 2022 tax return. C) no need to report 2023 Form 1099-R on 2023 tax return, in other words, nothing needs to done to 2023 tax return and it is a fresh start. Thanks a lot,

excess Roth IRA contributions for multiple years.

Are you sure that the amount distributed is incorrect? The NIA is calculated based on the account value on the date of distribution, not year-end 2022.

Assuming that the distributions are properly reported on Forms 1099-R as returns of contribution, simplest would be just to report what is on the forms and tell the IRS in the explanation statements that the loss in each case was the difference between the amount distributed and $7,000. Of course to know for certain what is on the forms you'll have to wait until you receive them before amending the 2022 tax return. Trying to get any excess distribution back into the account would be a very complicated, error-prone process.