excess Roth IRA contributions

[DaveF1006]

Neither should be taxable.  Code P reports that return a contribution that was taxable in the previous year and Q reports a qualified Roth contribution you took during the year.

[gjgogol]

additional info - I went back and looked at my 2021 and 2022 tax forms. I submitted an amended return for 2021 including/adding Form 5329, as well as submitting a Form 5329 in 2022.  I believe my financial institution withdrew my 2022 excess contribution in March 2023 (at a loss). Do I ignore the 1099Rs I received from my financial institution?

[AbrahamT]

Just to clarify, what exactly do you mean by the financial institution withdrew your excess contribution at a loss?

[gjgogol]

My financial advisor/company whom originally purchased the Roth IRA for me. Sorry for not using very good terminology. When we found out that it was an excess contribution situation, my financial advisor took steps to correct it by withdrawing the excess funds (years 2021 and 2022). They actually sold the shares and since the value of the shares were lower than when the shares were originally purchased, the withdrawal was less, i.e. a loss.  Example: original purchase was 70 shares at $100/share and sold the same 70 shares at $80/share.

[fanfare]

You have to file 2023 Form 5329 showing the resolution of the excess.

Or any remaining excess if you did take out all the excess.

@gjgogol 

[gjgogol]

@fanfare  - you stated that,

You have to file 2023 Form 5329 showing the resolution of the excess: Will TT help me with this?

Or any remaining excess if you did take out all the excess: $7K was the excess contribution, but the shares were sold at a loss for $5K at withdrawn. That is "acceptable", correct?

Also, do I have to report the 2022 excess contribution since I withdrew it in March 2023 BEFORE the 2022 tax filing deadline?

[fanfare]

"do I have to report the 2022 excess contribution?"

I can't help you anymore because I can't tell if you did two distribution requests or one distribution request.

If you look at the Form 5329 you will see that bringing the account down to zero is satisfactory.

Follow the directions for Form 5329 in each year, in order, and you will get the correct filing.

@gjgogol 

[gjgogol]

@fanfareI did submit a 2021 1040X to include Form 5329 for the 2021 $7K excess contribution as well as a Form 5329 for my 2022 $7K excess contribution as part of my 2022 tax return. I paid the 6% tax fee for both 2021 and 2022 as well as the IRS interest charges (charged by IRS invoice delivered to me in Jan 2024). With all that said, I am assuming that the financial institution issuance of 2023 Form 1099-Rs (2 of them; one for $7K and the other for $5K) are a formality at this point. Hoping I am finally done with this but the 1099-Rs threw my for a loop, thus my questions.

[fanfare]

You still have to file 2023 Form 5329 showing the excess on Line 18

and the resolution on Line 24 with the Box checked,

as documented by your 2023 1099-Rs.

If your amended 2022 Form 5329 doesn't have the excess on Line 24, you filed incorrectly.

But it must be non-zero to give you a 2022 penalty which you say you paid.

@gjgogol 

[gjgogol]

@fanfareYou stated that "You still have to file 2023 Form 5329 showing the excess on Line 18

and the resolution on Line 24 with the Box checked"...what "box" are you referring to?

[fanfare]

I was referring to Line 25.

When you have emptied out the Roth IRA, 6% of zero is zero.

TurboTax should ask you for the number.

@gjgogol 

[cpatmcc]

Hello, I contributed $1,800 directly to a Roth IRA in 2018 when my salary didn't allow me to contribute anything. I withdrew the excess funds ($1,800) paid the penalty, and amended my return. However, every year since then, I encounter this questions, "Enter Excess Contributions to Roth IRA in Previous Years." Every year, I've been entering $1,800. Should I be entering that number each year? Or is it ok to put $0, since I corrected it so many years ago?

[MinhT1]

@cpatmcc 

As you have already paid the excise tax and withdrawn the excess contributions, there is no longer an excess contribution to a Roth IRA, and you answer $0.