I had an excess Roth IRA contribution in 2022 that I recharacterized. The excess amount was added again to my 2023 return and I paid a penalty. How do I fix this issue?

[march142005]

I amended my 2022 return due to the recharacterization and was refunded the tax penalty for that year. I believe TurboTax pulled my original 2022 return and applied the excess contribution into my 2023 return. I want to amend my 2023 return but I did not have an actual excess contribution for that year. How do I amend my return?

[Opus 17]

Your total IRA contributions for 2022 would be $6000 or $7000 if over age 50.  That's for all your combined IRAs, so recharacterizing a Roth IRA contribution to a traditional IRA contribution will not necessarily make it not-excess.

Please give more details.  How much did you contribute in 2022, why was it excess, and how much did you recharacterize to a traditional IRA?  Then, what is shown in section III and IV of your 2022 form 5329?

Then, how much did you contribute to all IRAs in 2023 (Roth and traditional)?  What does your 2023 form 5329 show?

[march142005]

My excess contribution in 2022 was $3,710 on my Roth IRA. I was over 50 at the time and contributed the max $7,000 allowed. My MAGI hovered around $130k+. I didn’t become aware of the income contribution limits until early 2023. But I had already contributed the full amount that I thought I was allowed to once I turned 50.

I let my financial advisor know and he submitted the paperwork in April 2023 to recharacterize the excess $3,710. By then, I had already filed my 2022 tax return and paid the penalty tax for the excess contribution ($223). I didn’t file an amended 2022 return until April 2024. But per the recharacterization, I was refunded the tax penalty in July 2024.

However, that excess contribution was still showing up in Form 5329 for my 2023 tax return. And since I didn’t file the amended 2022 tax return until after I submitted my 2023 tax return, I again wound up paying the tax penalty for that excess contribution for 2023.

I had switched jobs mid-year 2023, so my MAGI was going to be well below the income limit of $138,000 for that tax year. I was able to contribute the full amount allowed ($7,500). But on Form 5329 for 2023, line 19 (If your Roth IRA contributions for 2023 are less than your maximum allowable contribution , see instructions. Otherwise, enter -0-.) has 0 entered. As a result, the form indicated that I had another tax penalty of $223 due to what appeared as a carryover from 2022, prior to my submitting the amended 2022 return.

When I filed my 2024 tax return this year, the Form 5329 still showed the $3,710 as an excess contribution on line 18, due to the carryover. But my MAGI was well below the income limit of $146,000 allowed in 2024 so I contributed the maximum amount to my Roth IRA ($8,000). This is what is showing on line 19 of Form 5329 for 2024. But there was no additional tax penalty.

I’m trying to amend my 2023 tax return to retrieve the $223 tax penalty since my excess contribution had already been recharacterized for 2022. But when I try to initiate the amended return via TurboTax, it is not reflecting the changes that resulted from the amended 2022 return. My added concern is that the Form 5329 continues to be generated, even though I didn’t technically have an excess contribution in 2024.

Does this context help?