Roth IRA overcontribution years ago

[minchingho]

I just realized that I have over-contributed my Roth IRA in 2016 by a couple hundred dollars. How do I report it in 2018 tax return? (I was single in 2016 but now file jointly with my spouse.) I have looked into 5329 form but it only covers the overcontribution of the current tax year.  In addition to the two 6% penalty, will I need to pay income tax based on that?

[dmertz]

You must file 2016 Form 5329 to report and pay the 6% penalty on the excess for 2016.  If you are not able to apply that excess as a Roth IRA contribution for 2017, you must do the same for 2017.  If the entire excess could not be applied as a 2017 contribution (eliminating the excess in 2017), 2018 TurboTax will prepare 2018 Form 5329 for this excess carried into 2018 and include it with your 2018 tax return.

If the excess could not be applied as a 2017 or 2018 contribution, the excess carries into 2019.  If you cannot apply this excess as a 2019 contribution you must obtain a regular distribution equal to the amount of the excess (with no adjustment for investment gain or loss) before the end of 2019.  That will eliminate this excess for 2019 and beyond.

[smg0100]

Can the 2016 Form 5329 be filed separately to pay the 6% penalty, or does it need to accompany an amended 2016 income tax return? The IRS instructions for this form are not entirely clear:

"Prior tax years. If you are filing Form 5329 for a prior year, you must use the prior year's version of the form. If you don’t have any other changes and haven’t previously filed a federal income tax return for the prior year, file the prior year's version of Form 5329 by itself (discussed earlier). If you have other changes, file Form 5329 for the prior year with Form 1040X, Amended U.S. Individual Income Tax Return."

Re: sentence two in the above quote, I have no other changes, other than that I would need to update tax owed on the original 1040; however, I did indeed already file the 2016 return. I'm just wondering if the corollary to the last sentence is also true, in that, if I have NO other changes, do NOT file Form 5329 with an amended return.

Thanks!

[dmertz]

As you've found, the IRS instructions are a bit ambiguous.  You can probably file Form 5329 stand-alone, but it also wouldn't hurt to include Form 1040X.  The only line on Form 1040X that would show a change would be the Other taxes line and it would include your explanation.

[smg0100]

Yup I'll play it safe and amend. Can TurnoTax handle a second amended return to an amended and original return I filed through another online tax e-fling service that doesn't process part 4 of Form 5329? Note this second amended return will be my first time use of TurboTax.

[smg0100]

Sorry this is likely a new topic but not clear how to pose new question as a new user of this forum.

[dmertz]

It's not practical to use TurboTax for such a simple amendment without having used TurboTax to file the original tax return.  Just use the fillable forms downloadable from the IRS.