Roth IRA excess contributions - amendments and penalties

[busybella]

Help! I've realized that I made excess contributions to my Roth IRA for 2020-2023. I only filed form 5329 for last year (2023) and did not realize I needed to withdraw or move my excess contributions. I will do that before this year's tax deadline.

2024 - contributed $5,772

2023 - excess contribution of $12,500 (filed form 5329 with my return and paid $780 penalty)

2022 - excess contribution of $13,500

2021 - excess contribution of $13,500

2020 - excess contribution of $13,500

I understand that I need to file amended returns for 2022-2020 to report the excess contributions. But since I did not withdraw the excess contributions, how do I calculate the penalty I need to pay for the excess contributions that were not withdrawn from previous years?

And I should be withdrawing $51,772 + earnings (the excess contributions minus my under contribution from this year) , correct?

[DanaB27]

To clarify, these were contributions to the Roth IRA, not your work retirement account? 

If you can make the full Roth IRA contribution then you can apply the some of the excess towards 2024.

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Do you have any Excess Roth Contributions" answer "Yes"
5. On the "Enter Excess Contributions" screen enter the total excess contribution from 2020-2023 
6. On the "How Much Excess to 2023?" screen apply part of the excess to 2024.

You need to take a regular distribution $51,772 (without earnings) to remove the rest of the 2020-2023 excess. You will get a 2025 Form 1099-R with code J (if under 59 1/2). When you enter it next year on your 2025 return the excess will resolve.

On your 2020 Form 5329 you will pay 6% on the 2020 excess ($13,500).

On your 2021 return you will pay 6% on the 2020 and 2021 excess ($27,000).

On your 2022 return you will pay 6% on the 2020, 2021, and 2022 excess ($40,500).

On your 2023 return you will pay 6% on the 2020, 2021, 2022 and 2023 excess ($53,000).

On your 2024 return you will pay 6% on the 2020, 2021, 2022 and 2023 excess minus the amount you can apply towards 2024 ($51,772).