Excess Roth IRA in 2023

[LucyLiu5]

I just realized I had an Excess Roth IRA in 2023. My 2023 tax return was prepared by a CPA instead of TT. It is the first time for me to use TT this year. I  wanted to move this amount to 2024 Roth IRA which is under my 2024 Roth IRA limit. I have not filed my 2024 return and not contributed Roth IRA for 2024 yet. 

By learning many posts, I understand I need to file an amendment 2023 by paying 6% tax on this excess.

Questions:

1. To carry this excess from 2023 to 2024, do I need to take actions with Merrill Edge? or I just fill in TT and report it in 2024 filing? 

2. For my 2024 filing, do I have to pay 6% tax? where to input? 

3. How shall I handle the earnings generated by this excess? 

4. 2023 amendment, can I do it by myself with TT or better to ask the CPA who prepared my 2023 to do so? 

5. Anything else do I have to take care before filing my 2024 return? i.e. 2023 amendment will be taken care later and I am not so familiar with its impact on 2024. 

I would like to invite @Dana17 to help me. Highly appreciated!

[fanfare]

" move this amount to 2024 Roth IRA which is under my 2024 Roth IRA limit."

This is key, you do not move anything. you use your 2024 amount to offset the 2023 excess.

You won't be able to make a 2024 Roth contribution.

You can do this on you 2024 tax return with form 5329. That eliminsates the 2024 penalty.

Earnings stay in the Roth IRA.

amend 2023:  ask the CPA to do it and how much it will cost you.

@LucyLiu5 

[fanfare]

If it costs too much you can do it yourself by generating one Form and one Schedule with the necessary corrections.

You would mail those two pages with Form 1040-X and your payment.

It's not rocket science.

You need a copy or transcript of your original return.

@LucyLiu5 

[LucyLiu5]

Thank you so much! @fanfare 

1. After offsetting this excess, I still have some remaining 2024 amount. Can you contribute now? for example, 2023 excess $1000, my 2024 limit is 6000, can I contribute 5000 to 2024 Roth IRA now before filing my 2024?

2. Do I need to take actions in my Roth IRA account? 

Much appreciated! 

[LucyLiu5]

@fanfareIn addition, I came across a post stating that a 2023 excess contribution may be subject to another 6% penalty if not corrected by December 31, 2024. However, I’m unsure if that applies to my specific situation. I just want to confirm—if I use Form 5329 to offset the 2023 excess in my 2024 tax filing, there will be no 6% penalty on this excess for 2024. Thank you so much!

[fanfare]

another penalty applies if you do not have an offset available and took no action in 2024.

But you say you do have an offset available to use on 2024 tax return.

What remains after offset can be used as a Roth IRA contribution or a Traditional IRA contribution.

@LucyLiu5 

[LucyLiu5]

I do have offset available for 2024 but the action will be taken in 2025 now, not in 2024, for 2024 tax filing. So, do I have another 6% penalty on this excess for 2024? 

do I need to take any action on my Merrill Roth IRA account? Thank you very much! 

@fanfare 

[fanfare]

The action is not taken in 2025. There is no action. It is a bookkeeping entry.

Review 2024 Form 5329 particularly Part IV Line 19 to understand how it works.

@LucyLiu5 

[LucyLiu5]

@fanfare Thank you so much~ I understand the logic. 

I wanted to learn how to file my 2023 amendment. I have my  original copy in pdf on hand. Could Turbo help me to create the form, schedules needed for amendment without re-do everything for 2023? 

Thank you very much!

[fanfare]

Without redoing everything, No.

It is easier to contstruct the one Form and Schedule by hand using the blank forms you can get in fillable PDF from IRS website.

Others on the forum will tell you the opposite,.

If you can do arithmentic, you can do it by hand without software.