Can I get refund for penalty I paid for excessive Roth IRA contributions if I amend my return with married filing jointly status instead of married filing separately?

[vp24]

I filed 2015 return with married filing separate status. Because of filing status I had to pay penalty for excessive roth ira contributions.  I recently amended that return by changing my filing status to "married filing jointly". IRS did approve my refund, I received check but refund doesn't include penalty I paid. Because I am changing filing status there should be no penalty for contributions I made. In IRS transcript it shows my penalty amount  with 896 code - overpayment credit offset. Can someone help me how to get back refund for penalty I paid ?

[Carl]

Nope. Penalties are only refunded by the IRS under extreme circumstances, and your situation isn't anywhere close to extreme. Nobody twisted your arm and held a gun to your head forcing your to file MFS in the first place. Also, chances are fairly good your amendment may come back to bite you. Generally, a married couple can not change their filing status once the filing deadline for that tax year has passed. I'm surprised it went through. But there are situations where it would be excepted. However, I can't think of a single one where the change from MFS to MFJ would be accepted more than 2 years after the original filing. (Not to say that such a situation that would allow it may exist)

[SweetieJean]

Married couples can amend from Separate to Joint, but not vice-versa.  However, spouse must agree to Joint.

[Opus 17]

You can refile MFS to MFJ any time.  The IRS likes "joint and several liability".   You can't amend MFJ to MFS once the original filing deadline is past.

[vp24]

Thank you for quick replies. I had valid reason to change my filing status which I explained in my amended return. My main question is can I get my penalty back since I am no longer subject to penalty if IRS approved my filing status change.

[dmertz · Accepted solution]

The excess contribution "penalty" is actually an excise tax.  If changing your filing status to MFJ made you eligible to make the Roth IRA contribution, you are no longer subject to the excess-contribution excise tax and your amendment changing your tax return to MFJ should have reflected that by including a correction to your originally filed Form 5329, resulting in a change on the Other taxes line of Form 1040X.  If your previous amendment did not include the corrected Form 5329 and the corresponding change on the Other taxes line of Form 1040X, amend again to make the change and to receive a refund of the excise tax.

Had you used TurboTax to amend a MFS tax return to MFJ, TurboTax should have included the corresponding change on the Other taxes line of Form 1040X.  However, because Form 5329 Part IV became all zeros, TurboTax probably would have omitted this form.  To explicitly indicate that you are no longer subject to the excess-contribution tax, your amendment should include Form 5329 Part IV with the previous non-zero amounts zeroed.

[dmertz]

It's also important to file a corrected Form 5329 so that the IRS does not think that you still have an excess contribution in your Roth IRA subject to continuing "penalties" each year going forward.

[dmertz]

Also, given that this is a 2015 tax return, you are well within the 3-year statute of limitations for filing to change from MFS to MFJ and to obtain a refund of the excise tax and other taxes.

[vp24]

Thank you for your guidance in the matter dmertz. Just want to let you know that i did get my refund check without sending anything again. Before i posted question on this forum, i had contacted IRS asking for my refund but person was not able to give me satisfactory answer and that is why i posted question to this forum. I was going to do what you suggested but now i got check and letter from them so i am good. thank you anyway.