In 2021 my spouse and I made excess ROTH IRA contributions of $4000. The excess contributions were withdrawn by the tax filing deadline, along with the earnings ($486) on those excess contributions. The earnings were reported as income for 2021.
In 2022 we made excess ROTH IRA contributions of $1000. The excess contributions (minus a loss of $244) were withdrawn by the tax filing deadline (a total of $756 withdrawn), so there were no taxable earnings.
There was no penalty because the excess contributions were withdrawn by the filing deadline.
In 2023, no ROTH IRA contributions were made, and there were no issues or additional tax regarding ROTH IRA contributions for previous years.
In 2024, TurboTax asks if we made excess ROTH IRA contributions for 2024 (no, we did not). Then we are asked if we opened any ROTH IRAs in 2023 or any previous year (yes, we did). Then we are asked to enter excess contributions for previous years, and given a reminder that “excess contributions should be withdrawn to avoid additional taxes”. If I truthfully enter $5000 (excess contributions for 2021 and 2022), TurboTax generates Form 5329 that shows a 6% additional tax ($300).
Since we withdrew excess ROTH IRA contributions by the tax filing deadlines and reported the earnings as income previously, how do we answer the excess ROTH IRA contributions for previous years question so that we are not assessed the additional 6% tax? If we state that excess contributions for previous years is $0, Form 5329 is not generated and no additional tax is shown, but we don’t know if this is correct, and wonder if doing that would be an error.
Thanks so much! Any help here is greatly appreciated.
