Roth IRA Excess Contributions for 2020, 2021 and 2022

[Rajmataj433]

I made $7000 excess contributions each to my Roth IRA for tax years 2020, 2021 and 2022 and my spouse's Roth IRA for 2020 and 2021. While doing my 2021 taxes, I discovered my errors in March 2022 and filed an extension for my 2021 taxes to extend the deadline to Oct 15, 2022.  I worked with my broker to resolve the excess contributions as follows:

For my Roth IRA, 

In May 2022, the broker returned  (withdrew) $7000 excess for tax year 2020, returned $5614 (including losses) for tax year 2021 and $6652.10 for tax year 2022.

For my spouse's Roth IRA

In May 2022, the broker returned (withdrew) $7000 excess for tax year 2020, and recharacterized the 2021 excess to the traditional IRA  - $11000 including earnings.

What I have done so far

In April 2022, amended 2020 return and paid 6% penalty for both IRA's. for 2020 excess.

In August 2022, filed my 2021 tax return.  Paid 6 % penalty again for both IRA's for 2020 excess. Since the 2021 excess was withdrawn for my Roth IRA and recharacterized for my spouse's Roth IRA before the extension deadline of October 15, 2022, I did not show excess for either IRA for 2021. I created a 1099 R and the distribution of $5614 was reported in 2021 tax return.

Please confirm if all that has been done so far is correct.

Now I am doing my 2022 tax return.  I am planning to amend my 2020 return again to show that the 2020 excess has been removed from both our IRA's. I received 1099 R's for all of the above distributions in Jan 2023. Here are my questions:

1) After I amend my 2020 return to show the excess has been removed in Form 5329, please confirm that I am done with the 2020 excess for both IRAs for future years.

2) I do not intend to show any excess for tax year 2022, since it was removed in 2022 itself. Please confirm that is correct.

3) Turbotax interview questions ask for all the 1099 R data.  Since 2021 distribution and recharacterization was entered in the 2021 return, it need not be shown in the 2022 return.  Is that correct?

4)Turbotax Deluxe seems to be adding the 2020 distribution amounts of $14000 to the $6652 withdrawal of the 2022 excess.  Why is that - should the distribution/contribution for 2022 return not just include $6652? 

5) If it should only include the 2022 excess withdrawal of $6652, should the $14000 distribution of 2020 excess be shown in the amended 2020 return?

I apologize for the LONG question but I am really stressed and at a loss on resolving this correctly.  I appreciate your patience in reading the question carefully and providing a complete response to all my questions.

Many thanks in advance

[fanfare]

you don't have to amend 2020 a second time, you already paid the penalty.

the excess is carried forward to 2021 Form 5329.

similarly you don't have to amend 2021 because any excess there  is carried forward to 2022.

if spouse cleared it all up for 2021, the excess spouse reports on 2021 Form 5329 should be zero on Line 24 and there is no additional tax either.

@Rajmataj433 

[fanfare]

@Rajmataj433 

above edited to say 2021, not 2022

the year of resolution of the excess is different for your spouse and for you.

It looks like you filed an incorrect 2021 Form 5329 for yourself and you'd have to amend to correct that.

[Rajmataj433]

Thanks for your responses.

Here are some clarifications:

1) The excesses for both me and my spouse were resolved in May 2022.

2) I paid 6% penalty on the 2020 excess for both me and my spouse for 2020 and 2021. Since it was resolved in 2022 for both of us, I agree with you that I don't need to amend 2000 return again - I just need to show on 2022 Form 5329 that the excess is 0.

3) For 2021 return, I did not show 2021 excess for either of us - since excesses were resolved before the Oct 15, 2022 extension deadline. Similarly, I am not going to show 2022 excess in my 2022 return since it was resolved in the same year.

Here are my specific questions re how the the distribution amounts in 1099 R's should be correctly addressed in Turbotax

I received the following 1099 R's from my broker in Jan 2023. All excesses resolved in 2022.

   1)  2020 Excess Contribution Resolution

     1099 R for my Roth IRA  - gross distribution $7000 for my 2020 excess contribution - Box 7 code is T.( State            tax withheld; no fed tax withheld)

     1099 R for my spouse's Roth IRA - gross distribution $7000 for her 2020 excess contribution. Box 7 code is T        (Both Fed and State tax withheld)

In which tax year return (if any) do I show these $7000 distributions (as contributions)for me and my spouse? Or do I ignore those since I have paid penalties for 6% for both 2020 & 2021?

2) 2021 Excess Contribution Resolution

1099 R for my Roth IRA - gross distribution of $5614 (including loss) for my 2021 excess contribution.  Box 7 codes of J, P.

    1099R for my spouse's IRA showing the recharacterization to a traditional IRA - gross distribution of $11000 for her 2021 excess contribution - Box 7 code R.

   I addressed the above in 2021 return.  Showed $5614 as contributions on line 4a of 1040-SR; the recharacterization for my spouse was explained in a statement but the $11000 amount did not show up in the forms. Please confirm that 2021 return was done correctly.

3) 2022 Excess Contribution Resolution

    1099 R for my Roth IRA - gross distribution of $6652.10 (including loss) for my 2022 excess. Box 7 codes 8,J

I believe the 2022 tax return should show line 4a contributions of $6652.10.  However, turbotax is showing contributions of $20,652.10.  In other words, it is including $14000 distributions for 2020 excess in the 2022 return. Why is that ? It may be that I have submitted incorrect responses to the Turbotax step by step questions.

Again many thanks for your patience and complete responses.  Please also indicate if you are a Turblotax expert.

[fanfare]

"[where] do I show these $7000 distributions (as contributions)f"

 [I] showed $5614 as contributions on line 4a of 1040-SR;

You don't report contributions on line 4.

Line 4 only shows distributions.

when spouse  recharacterized, it is now a contribution for the year the original Roth contribution was for.

See IRS Pub 590A Page 28 Recharacterizations.

if it is deductible spouse puts it on the IRA contribution line, Schedule 1 Line 20. 

if it is not deductible spouse puts it on line 1 of Form 8606.

{I] Showed $5614 as contributions on line 4a of 1040-SR;

your statement is very confusing and very wrong.

$5614 on Line 4 is your excess which you distributed; you did not recharacterize; you made no contributions

Line 4 includes all distributions made in that year.

@Rajmataj433 

More confusion;

you should not even be mentioning tax year 2022 since that was handled timely and is well understood.

[Rajmataj433]

Thanks - this is helpful