Part III of Form 5329 - be careful if you back out of the Roth dialogue

[KD9]

I seem to have an unusual problem. In 2019 and 2020, I was concerned that I might be over the Roth contribution limit so I ran the numbers through Turbo Tax (desktop) and yes, I was over. So I backed out, made no Roth contributions, and filed. Turbo Tax has worked so well for me over many, many years, that I did not review the forms carefully and did not notice that TT had included (both years) a form 5329 and subtracted a substantial penalty from my refunds since I was over the limit. I noticed this the next year and filed 1040X revisions and got a very terse reply that "We previously adjusted your account...the adjustment we made went to an offset on another account. We are taking no further action at this time." I telephoned and someone eventually told me that the money was a penalty and apparently went to something like law enforcement? So they didn't have any straightforward way to refund me. He suggested that I file revised forms 5329 as well and I am hoping that this will trigger something more satisfactory. The amounts are not trivial. Can you advise me on any alternative course? And I hope that this quirk in TT is now fixed (this year I was under and did not back out so I don't know), and that no one else has been hit with this kind of penalty.

[fanfare]

"I noticed this the next year and filed 1040X revisions
... ...
He suggested that I file revised forms 5329 as well "

no corrected Form 5329 on your initial Form 1040-X ?

you can't amend tax year 2019 for a refund. It is past the deadline.
you can't amend tax year 2020 for a refund after May 18, 2024.

@KD9 

[fanfare]

If you had an unresolved Part III on your 2020 tax return,

and TurboTax processed your history correctly,

it should have carried your excess and penalty forward to 2021, 2022 and 2023

@KD9 

[KD9]

The IRS seems to have accepted my revision. Got half of it today. I didn't actually owe the penalty that I had incorrectly paid, so I guess they felt obligated to refund it. 

This year I was below the limit, so made a Roth contribution. TT made the calculation and I continued, so didn't find out whether backing out still leaves an incorrect penalty. I guess not many people use the back-out method to find out if they are over the MAGI limit. Was a pain in the butt to get the refund done, so I don't advise finding out that way. 

[KD9]

And glad they did not carry the penalty forward as you say. Don't know why.