Excessive Roth IRA

[Cladenstien56]

Hello! I have made excessive contributions to my ROTH IRA for years 2020 and 2021. I have recently taken out the contributions in April of 2022 (before the October deadline with the extension). I have a couple questions on completing my amended tax return, and on filling out form 5329. First, do I report the distributions I took out in April 2022 on my 2020 5329 form (line 20 on 5329). Second, TurboTax calculated the 6% penalty for me, and on my 5329 I got the same number, so do I submit the 5329 with the amended return (I don't want to pay twice).  On my 2021 amendment, do I report the full distributions (2020 and 2021 excessive contributions I took out), or do I just report the 2021 excessive contributions I took out. Last, do I wait for a confirmation my 2020 amended tax return has been accepted before I can work on my 2021? Thank you so much!!!!

[AdamNe]

Hello @Cladenstien56 !

You have done the first step by removing the excess contributions (and all earnings on those contributions, I assume) from the Roth. 

Now, if you just removed the funds in 2022, you cannot go back and remove the 6% penalty from 2020 and 2021. You don't need to amend your return at all, as long as you claimed the excess contributions properly in both years. The only reason one would amend would be if the contributions were removed in the same year before the extended tax return deadline. 

What you will need to do is indicate on your 2022 tax return that you have corrected the overcontributions in order to avoid paying the 6% penalty again. You will also have a 1099-R for 2022, and the earnings will be taxable (and may be subject to the 10% penalty for early distributions if you are under 59 1/2). 

I hope that helps! 

All my best,

Adam, EA

TurboTax Live Expert