How to amend tax return for excess Roth contribution

[WendyN2]

Before filing an amended return, make sure the IRS has already processed the tax return you need to amend. That way, you can ensure the IRS won't get your original return and amended return mixed up. If you've already received your tax refund, then you know the IRS has already processed your return.

Just keep in mind that the IRS limits the amount of time you have to file an amended return to claim a refund to:

• Within three years from the original filing deadline, or
• Within two years of paying the tax due for that year, if that date is later.

If you're outside of that window, you can't claim a refund by amending your return.

How to file an amended tax return

The process for filing an amended return is fairly straightforward. Here's a step-by-step guide.

Step 1: Collect your documents

Gather your original tax return and any new documents needed to prepare your amended return.

If you initially filed your tax return using TurboTax, you can access your tax return online or print a copy of that return by logging in to your account at TurboTax online or print a PDF of your return from the copy saved on your computer. 

You can also prepare your amended return in TurboTax. To do this, you need to use the version of TurboTax that applies to the tax year you need to amend. For example, if you need to amend your 2019 tax return, you need to use the 2019 version of TurboTax.

If you prepared your original tax return using TurboTax, log in to your account, open the tax return you already filed, and click on the link to amend your return. From there, the software will walk you through the process of filing the amendment.

[sjs12]

Thanks @WendyN2 !

Here is my situation:

My wife unknowingly contributed $1,500 into a Calsavers Roth through work in 2020. In Feb 2021 she contributed into Vanguard the max $6,000 for the year 2020. So there is a total $7,500 contribution with an excess of $1,500 for tax year 2020. I just completed the process to remove the $1,500 + all earnings from Vanguard.

My question is, do I need to amend my 2020 tax return? When I filed it I put into thurbotax I put she contributed $6,000 because I did not know about the excess $1,500. The excess $1,500 was also removed before April 15 2021. If I understand correctly the 1095-B for the taxes on the distribution will come for 2021 taxes.

[WendyN2]

Your best and safest bet for accuracy and clarification with the IRS going forward would be to amend the return. Again, remember what I had said before about making sure that the IRS has received, accepted, and processed your return before doing so. The IRS will catch this oversight on your part, but depending on when they do so will also dictate what all they charge you for any interest/penalties incurred for any tax preference you received.  The general rule of thumb, so to speak, is that if you've come to realize that you made a mistake in filing, fix it as soon as you can. AGAIN, provided the IRS has already processed the incorrect return. Otherwise, they wind up with two in the system and that just causes a whole big mess!

[sjs12]

I just don't understand where I would amend the return? When I download my return I don't see the Roth contributions anywhere. I just see it in Turbotax's IRA contributions worksheet. That worksheet would be changed to show a $7,500 contribution on line 24 and a $1,500 withdrawal on line 25 for the same $6,000 output. Unless they send worksheet to the IRS the return seems to remain unchanged.

And yes, the return has been fully processed already.

Am I right in thinking the 1095-B will be received for tax year 2021 if the contribution was made and withdrawn in 2021?

[WendyN2 · Accepted solution]

Yes, you are correct in that the 1095-B will be received for this current tax year (next Jan 2022). If the return itself is remaining unchanged then the end result is no different so in that case I would do nothing as the IRS would only "balk" on it if it changed your bottom line tax liability.

[sjs12]

That makes sense, thank you for all of the help.

Everything I've read about this says you need to amend your tax return if you've already filed it, but I think that only applies if the excess was withdrawn for that tax year (in this case 2020) as it would result in a taxable event.

I'm thinking in my case there is no change to my 2020 tax return, but I will be taxed for gains on the excess for my 2021 tax return.

As far as I understand (and please correct me if I'm wrong) the 1099-B is the form that reports that the overcontribution was removed, and the form that reports income on that removal to the IRS. So unless I get one for tax year 2020 that return should remain unchanged.