Questions about Excess Contributions and Form 5329

[neutron450]

I made excess contributions to a Roth IRA in 2021, 2022, 2023 and 2024.

I got in touch with Vanguard and had the excesses removed in March along with the NIA from 2024.

I'm working on filling out 5329s for each of those years but I'm confused about the instructions for Lines 1 and 2. I've read through the instructions but I'm not confident that I understand what they want for my scenario.

I guess my questions are these:

-- Line 1 in form 5329 appears to be only the gains I received on the excess contributions I made in 2024. Is that correct?

-- Do I put anything on Line 2 in Form 5329?

-- Do I need to fill out Form 8606 for any or all of the years?

Grateful for any input.

[dmertz]

In regard to your 2024 Form 5329, only the amount from box 2 from a code JP 2025 Form 1099-R goes on line 1 of this From 5329 because only taxable amounts are potentially subject to an early-distribution penalty.  However, the NIA gains distributed with a return of contribution before the due date of the tax return, including extensions, are an exception to the penalty, so line 2 of the 2024 Form 5329 should show with code 21 the same amount as  is on line 1.

[Correction]

Because the excess contributions for 2021, 2022 and 2023 were not corrected until 2025, Part IV of your 2024 Form 5329 will still show the total of these excess contributions which are subject to penalty for 2024.  Part IV of the 2025 Form 5329 will need to be prepared to eliminate the excesses carried into 2025 from 2024.

If you were under age 59½ at the time of these distributions or it has been less than 5 years since beginning of the year for which you first made a Roth IRA contribution, 2025 [correction, not 2024] Form 8606 Part III is required to make the distribution of the 2021, 2022, and 2023 excesses nontaxable.  Even though they were excess contributions, they added to your basis in Roth IRA contributions which needs to be subtracted from the total of these distributions.

You didn't ask about Part IV of 2021, 2022 and 2023 Forms 5329.  These should have been filed and, if were not filed, need to be filed and the penalties paid. 

[fanfare]

@neutron450 

ChatGPT 4o offers to help.

Are you feeling lucky?

----

If I upload a fillable PDF of an IRS tax form can you fillin the entries with my amounts?

ChatGPT said:

Yes, I can help with that.

Please upload the fillable IRS tax form (PDF), and let me know:

• Which fields or boxes you want filled in (e.g., “Line 1 = $12,000”),

• Any other details (like name, SSN, etc.) that should go on the form.

Once uploaded, I’ll return a completed version of the form with your values entered.

4o

You said:

can you apply the US Tax Code and fill in applicable lines for a given situation particularly, such as Form 5329

ChatGPT said:

Yes, I can help fill out Form 5329 (Additional Taxes on Qualified Plans, etc.) based on your specific situation — applying the U.S. Tax Code rules to determine what lines are applicable and what amounts go where.

Here's what I’ll need from you:

1. Which part(s) of Form 5329 apply:

   • Early distributions (Part I)?

   • Excess contributions to IRAs (Part III)?

   • Missed RMDs (Part IX)?

   • Or other sections?

2. Your situation details, such as:

   • Type and amount of retirement distributions

   • Ages of account holders

   • Whether distributions qualify for exceptions

   • Any missed RMD amounts and the year(s) involved

   • Excess contributions and when they were made or withdrawn

3. Any previous penalty waivers requested or corrective actions taken

Once you upload the fillable PDF of Form 5329 (or I can use the IRS’s version), I can:

• Calculate penalty amounts or exceptions, using the tax code rules

• Populate the form correctly

• Return the completed PDF or give you the filled line numbers if you prefer to enter them manually

Would you like to proceed with that?

4o

You said:

Perhaps later.

ChatGPT said:

Sounds good — whenever you're ready, just upload the form and provide the details, and I’ll walk you through it or fill it in for you. Let me know how you'd like to proceed when the time comes.

4o

[fanfare]

If you post your own completed form(s) 5329, with name and SSN expunged.

some human forum participant familiar with the rules might be willing to tell you whether you got it right.

@neutron450 

[neutron450]

Thanks dmertz--that's very helpful!

It sounds like I put the NIA of $316 on both lines 1 and 2, along with Code 21.

Part IV looks pretty straight forward. There's some math to do there but the instructions seem clear. I'll do one for each year.

Also will fill out one Form 8606 (2024) for the 21, 22 and 23 portions of the distribution.

Do you recommend I try to tackle this now, or wait until I have the 1099Rs in January?

[neutron450]

Thanks fanfare!

I'll work on get some forms put together and will share them here.

I've been poking at some AI tools and have found that helpful but also have gotten some answers that look wrong to me. Here's an example:

[dmertz]

There is no need to wait to do the 2013, 2022 and 2023 Forms 5329 Part IV.

I made a mistake in my previous post.  Because the correction of the 2021 though 2023 excess occurred in 2025, this distribution will go on your 2025 Form 5329 IV not your 2024 Form 5329.  Part IV of your 2024 Form 5329 will still show these excesses subject to penalty for 2024.  The 2025 distribution to correct these will be on a code J Form 1099-R that will be reportable on Part III of your 2025 Form 8606.  I'll correct my previous post.

[dmertz]

AI chatbots almost always provides erroneous information in regard to taxes.  Never use them for obtaining tax information.  Qualified disaster distributions are not reported on Form 5329.  See the instructions for Form 5329.

[neutron450]

@dmertz 

I found a paragraph (added below) that matches my scenario. It seems to indicate the last round of penalties and taxes on NIA gains would be dealt with on my 2024 amended return. What's your interpretation?

Grateful for your input!

i8606 page 6:
If you timely filed your 2024 tax return without
withdrawing a contribution that you made in 2024, you can
still have the contribution returned to you within 6 months
of the due date of your 2024 tax return, excluding
extensions. If you do, file an amended return for your 2024
tax year with “Filed pursuant to section 301.9100-2”
entered at the top. Report any related earnings on the
amended return and include an explanation of the
withdrawn contribution.

[dmertz]

That paragraph only addresses a contribution returned before the due date of the tax return, the contribution made for 2024 in this case.  Excess contribution distributed after the due date of the tax return for the year for which the contribution was made is not corrected until the year of the distribution, in this case 2025 for the 2021, 2022 and 2023 excess contributions.