How to fix incorrectly-reported corrective distribution dating back to TY 2020 and TY 2021?

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SUMMARY: My 2023 Federal return is showing an excise tax on Form 5329 line 25 due to an excess Roth IRA contribution, even though no Roth contribution was made in 2022. Excess Roth contributions were actually made in both 2020 and 2021 and were later withdrawn along with the associated gains. Unfortunately this was incorrectly reported as I apparently misunderstood the interview questions. I amended the 2020 return in April of 2022 to fix this problem but even that is not correct as the associated gain was reported in Part I. It seems like I now need to file amended returns for 2020, 2021, and 2022?

Luckily I am now retired and have the time and inclination to study all the IRS instructions rather than depend solely on the interview process. But I also need some guidance from those with experience in this area. Do the community experts actually have time to get into this level of detail?

DETAILS: The problem originated in 2020 (age 65). On March 2, 2020 I made a contribution of $6,500 to my Roth IRA but later that year I received unexpected taxable income. This caused my modified AGI to exceed the limit of $139,000 and the contribution to become an excess contribution. I discovered this after submitting my 2020 tax return and immediately contacted the Roth IRA custodian to withdraw the excess contribution and associated gain, which occurred on June 25, 2021. I submitted an amended 2020 return but unfortunately TurboTax incorrectly reported it in Part I (Additional Tax on Early Distributions) rather than Part IV (Additional Tax on Excess Contributions to Roth IRAs) of Form 5329.

In tax year 2021 the same thing happened again due to further unexpected taxable income late in the year. On March 22, 2021 I made a contribution of $6,500 to my Roth IRA but later that year I received unexpected taxable income. This caused my modified AGI to exceed the limit of $139,000 and the contribution to become an excess contribution. On April 11, 2022, the Roth IRA custodian withdrew the excess contribution and associated gain. Part IV of Form 5329 (Part I was blank) showed an excess contribution on lines 18, 22 & 24 and the associated excise tax on line 25. The rest of Form 5329 was blank. I cannot tell if the amount shown on Form 5329 came from the 2020 or the 2021 excess contribution. I cannot find the small gain ($28) from the 2021 excess contribution anywhere in the return.

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Wow, 1,492 views and not a single comment.

[DanaB27]

2020:

No, you should not have a 6% penalty calculated on your 2020 tax return (Form 5329 part IV) since you removed the 2020 excess contribution plus earnings before the extended due date.  Please make sure you enter the excess contribution amount as withdrawn on the penalty screen during the IRA contribution interview. 

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Continue until the penalty screen and enter the 2020 excess contribution amount withdrawn.

No, you should not have the 10% early withdrawal penalty calculated on the earnings (from box 2a of 2021 Form 1099-R with codes P and J) on your 2020 tax return because you were over 59 1/2. Please make sure you select continue after entering all Form 1099-Rs. Then continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" since you are over 59 1/2. Then TurboTax won't add the 10% early penalty and will enter the exception in part I of Form 5329.

2021:

No, you should not have a 6% penalty calculated on your 2021 tax return (Form 5329 part IV) since you removed the 2021 excess contribution plus earnings before the extended due date.  Please make sure you enter the excess contribution amount as withdrawn on the penalty screen during the IRA contribution interview. Also, delete the entry on the "Enter Excess Contributions" screen when the 2020 excess contribution got carried over incorrectly.

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Do you have any Excess Roth Contributions" answer "Yes"
5. On the "Enter Excess Contributions" screen delete the entry
6. Continue until the penalty screen and enter the 2021 excess contribution amount withdrawn.

Please make sure you will have to enter the 2022 Form 1099-R with codes P and J on the 2021 return to report the earnings from box 2a.

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Enter the 2022 Form 1099-R with codes P and J 
5. On the "Which year on Form 1099-R" screen say that this is a 2024 Form 1099-R.
6. Click "Continue" after all 1099-R are entered and answer all the questions.
7. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" since you are over 59 1/2.

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WOW!  --> @DanaB27   DanaB27, that is an EXCELLENT ANSWER! Ten thumbs up to you!

HOWEVER, now I am stuck with "TurboTax Amend 2020"  (on Win10, LG Gram). When I open my .tax2020 file it says:

"Your federal tax return is now on this computer. Let's get your South Carolina, North Carolina forms next.  Error 190"

with options:

- click for solution (= link to TurboTax Support search page)

- Download my state forms (= opens a new blank window that hangs for at least 5 minutes)

- Cancel (= goes back to TurboTax with no tax file opened)

Naturally I searched on "Error 190" and got one hit:

https://ttlc.intuit.com/turbotax-support/en-us/help-article/system-responses/error-190-opening-file-...

I followed these instructions but end up at another blank TurboTax window that hangs for at least 5 minutes.

I also followed the instructions at

https://ttlc.intuit.com/turbotax-support/en-us/help-article/product-delivery/start-windows-selective...

but this changes nothing.

I feel no need to amend the states, just the federal, but TurboTax Amend 2020 won't let me do that, either, since it won't open my .tax2020 file unless, apparently, the states are installed.

Thanks in advance for your clear and comprehensive suggestions!

[DanaB27]

You will have to contact TurboTax support to get help with this issue. Please see What is the TurboTax phone number?