Roth IRA Excess Contribution previous tax year
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New Member

Roth IRA Excess Contribution previous tax year

After filing taxes this year (Single), I was going to contribute to my Roth IRA (procrastination, I know), but decided to double-check my understanding of MAGI -- apparently I over contributed to my Roth IRA last tax year (2015). I have no clue how to fix this. I haven't contributed anything this tax year (2016) but would like to. From doing the math, I think my entire contribution last year is in excess of Roth limits since I made more than I expected (and I apparently didn't understand MAGI well enough).

Does anybody know how I rectify this? Some answers to similar questions mention some forms, but I'm not sure what those forms are and where to get them. I'm guessing I'll need to withdraw funds from my Roth IRA? Could I withdraw into a Traditional IRA for the 2015 year, or is that not allowed? I'm guessing I have to file an amended 2015 tax return. Can I do this with TurboTax? I still have the software installed.

4 Replies
Level 15

Roth IRA Excess Contribution previous tax year

If you made an excess 2015 Roth contribution then it is too late to remove it to avoid the 6% penalty for 2015 - that would have had to be done before Oct 17, 2016.    You need to amend 2015, enter the Roth contribution in the IRA contribution section and answer the follow-up questions that you did not remove the excess.  That should add a 5329 form with the 6% penalty that will go on line 59 on the amended 1040 form.

For 2016, you need to remove the excess as a normal distribution.  That must be done before Oct 18, 2017 to avoid another 6% penalty in 2016.   If you have not entered the Roth contribution excess into the 2016 interview, then TurboTax will not know about it so if removed, you don't need to do anything now.   Just check line 59 on the 2016 return to be sure that there is no penalty.

If removed in 2017, you will receive a 2017 1099-R to report the distribution next year on your 2017 tax return.


https://ttlc.intuit.com/questions/1894381-how-to-amend-change-or-correct-a-return-you-already-filed

https://ttlc.intuit.com/replies/3288565

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Level 15

Roth IRA Excess Contribution previous tax year

Just to add:  You do not need to remove any earnings - only the amount of excess.   The earnings (if any) stay in the Roth since you will be paying the 6% penalty in 2015 that qualifies the earnings to stay in the Roth.   In 2017 when you enter the 1099-R, you include the 2015 contribution when it asks for prior year contributions so you will not be taxed again on the same money.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
New Member

Roth IRA Excess Contribution previous tax year

I understand I'm going to pay the penalty, either way, but is it possible to re-characterize the excess into a traditional IRA? Also, I, unfortunately, haven't been tracking my IRA via Turbotax, so, I know I'll have to amend and re-file my 2015 form, but do I need to do the same for the 2016 form? It sounds like, as along as I remove the funds by Oct 18th, I should be okay on that front. You mention removing the excess as a normal distribution -- I'm assuming you mean withdraw from the IRA account? Or does it mean something different?
Level 15

Roth IRA Excess Contribution previous tax year

1) You can only recharacterize (or get a return of contribution ) before the extended due date of the 2015 tax return - Oct 17, 2016 after that is is an excess contribution that can only removed to avoid yearly 6% penalties.   What I mean but a "normal" distribution, is just to take the money out.  Do not tell them that this is a removal of excess contribution because that cannot be done for a 2015 contribution and they might code the 1099-R improperly. The 2017 1099-R should have a code "J" or "Q" in box 7 depending if you are under age 59 1/2 or over and not a code "JP" for a return of excess contribution.

2) Yes, I mean that you must take a distribution from the Roth IRA before the Oct 18 extended due date equal to the excess.

3) For 2016 if the 2015 excess carried over to 2016 by transferring the 2015 information into 2016 then you would need to remove that from the 2016 IRA contribution section.   But since you never reported (I assume) the excess on the 2015 tax return, then it probably is not in the carry-over information at all so will not be on the 2016 return as an excess.   That is why I suggest that you look on the 2016 1040 line 59 just to be sure that it did not carry over.  If it did, then go through the IRA contribution interview, check the Roth check box, do not enter a new contribution and click through until the excess contribution shows up.  If the excess box is auto-populated with the 2015 excess carry-over amount enter 0 (zero) to remove ti and that will also remove the penalty since you are going to remove it from the Roth account before Oct 18.  You don't want to pay the 2016 penalty as long as you intend to remove it.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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