Excess Contribution For Roth IRA removal and reporting

[sridharm]

Thank you so much Dana B everything looks much better. Before proceeding filing with Year 2022  do I suggest should I first finish off with Year 2021 amendment. I will reach out if I am stuck anywhere with 2021 amendment.

Regards,

Sri

[DanaB27]

Generally, you do not need to wait for the 2021 amended return before filing your 2022 tax return.

[sridharm]

Hi DanaB27,

I started the process of amending our 2021 return in TurboTax. Added the following 1099-R for

myself and my wife as below. It is okay If I share the token code (through share my file with agent)  for

your review.

Self 1099-R

1 Gross distribution $2,422.86
2a Taxable amount $222.86
4 Federal income tax withheld $22.29
7 Distribution code(s) J, P

When it prompted "Did you use your IRA to pay for any of these expenses?" screen ,

entered $222.86 (earnings) under "Another reason".
Spouse 1099-R

1 Gross distribution $2,664.17
2a Taxable amount $186.39
7 Distribution code(s) J, P

When it prompted "Did you use your IRA to pay for any of these expenses?" screen ,

entered $186.39 (earnings) under "Another reason".

In the end <Your to-do list review>

IRA Contributions Worksheet 2021

                                                                                       Tax Payer              Spouse

26 Excess Roth IRA contribution credit                  130                       100

Not sure how to go about this.

Also as due to adjusted MAGI now 

Form 5329 for Self now shows

Part IV Additional Tax on Excess Contributions to Roth IRAs

23 Excess contributions for 2021 (see instructions) . . . . . . . . . . . . . . . . . . 23     290

Form 5329 for Spouse now shows

Part IV Additional Tax on Excess Contributions to Roth IRAs

23 Excess contributions for 2021 (see instructions) . . . . . . . . . . . . . . . . . . 23     100 

How to address this since I yet to file 2022 can this excess be absorbed into Year2022 Roth IRA as we

will still can contribute further there.

Thank you for your support. On you acknowledgement I will share the token number.

Regards,

Sri

[DanaB27]

Yes, you can send me a token for the 2021 return.

Yes, the earnings from the excess contribution are taxable and increase your MAGI. Therefore, if you only removed a part of the contribution, it can create another excess. Therefore, it is usually best to remove some extra contributions to avoid this. Yes, you can absorb the 2021 excess on your 2022 tax return since you can still make Roth contributions for 2022.

On your 2022 tax return, you will add the new excess to the other excess:

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 add the new excess to the already entered excess
6. On the "How Much Excess to 2022?" screen enter the remaining excess listed to be absorbed in 2022.

@sridharm

[sridharm]

Thank you DanaB. Here is my  token number 1108814@DanaB27. Looking forward for your feedback.

Regards,

Sri

[DanaB27]

Thank you, I reviewed your token. Everything looks good. 

You now just need to adjust the excess amount on your 2022 tax return (because of the newly created excess in 2021):

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 enter the amount from line 24 of the 2021 Form 5329
6. On the "How Much Excess to 2022?" screen enter the remaining excess listed to be absorbed in 2022.

@sridharm 

[sridharm]

Thank you very much DanaB. I will proceed with your recommendations.

Regards,

Sri

[sridharm]

Hi DanaB,

I finally efile or 2021 tax amendment in TurboTax.  We are now proceeding with filing of our 2022 return.

I have one question.

1. Where in the return (which form) the 2021 excess to 2022 reflected.

2. Also I noticed $71 is credited towards the 2022 contribution unable to figure where it came from.

I can share token code if you don't mind reviewing it once .

Thank you for your excellent support.

Regards,

Sri

[sridharm]

Hi DanaB,

Some additional Information. The following is shown only for me in the How Much Excess to 2022 screen.

Should I add the 2021 excess to this amount and proceed further?

How Much Excess to 2022?

Indicate how much of SRI's remaining excess contribution of $71 you want to credit toward SRI's 2022 Roth IRA contributions.

Excess to Credit to 2022 Roth IRA Contributions 71.

Thank you for your help.

Regards,

Sri

[DanaB27]

1. The excess from 2021 will be listed on Form 5329 line 18. 

2. The credit is the excess amount that will be absorbed in 2022 since you have contributed less than your allowed contribution amount for 2022.

Yes, you will add the new 2021 excess to the already entered amount (the total entry on the "Enter Excess contribution" screen should match line 24 of your 2021 Form 5329). 

Yes, if you send me a token then I can take a look at your return.

@sridharm

[sridharm]

Thank you DanaB. Here is the token number 1111463@DanaB27. We will await for your feedback.

Regards,

Sri

[DanaB27]

Thank you, I reviewed your token.

To verify, when you sent me the 2021 tax file you showed $2,210 on line 24 of Form 5329 and your spouse showed $2,050. These excess contribution amounts should show up on line 18 of your 2022 Form 5329. Please verify your entries on the "Enter Excess Contributions" screen during the IRA contribution interview. Currently, you show $2,080 for you and $1,950 for your spouse on line 18 of your 2022 Form 5329.

@sridharm 

[sridharm]

Hi DanaB,

I think due to minor correction the final 2021 amendment return that was filed reflects $2080 for self and $1950 for my wife on Form 5329.
Now in the "Enter Excess Contributions" screen for Year2022 only for my self by default it shows as below.

How Much Excess to 2022?

Indicate how much of SRIDHAR's remaining excess contribution of $71 you want to credit toward SRIDHAR's 2022 Roth IRA contributions.

Excess to Credit to 2022 Roth IRA Contributions 71.

So should I change the amount to 71+2080 = 2151.

On my wife's screen How Much Excess to 2022?

How Much Excess to 2022?

Excess to Credit to 2022 Roth IRA Contributions 1950.

If I proceed with the above in the end it is asking to review the IRA Contributions worksheet

Check This Entry

IRA Contributions Worksheet 2022: Line 26 - Spouse's excess Roth IRA contribution credit should not be more than zero.
Line 26 - Spouse 150

Check This Entry - Self

IRA Contributions Worksheet 2022: Line 26 - Taxpayer's excess Roth IRA contribution credit should be equal to $71.00,the Roth
IRA contribution credit from Form 5329, Part IV.
Line 26 - Taxpayer 231

Could you please guide me further on this. Thank you for your support.

Regards,

Sri

[sridharm]

Thank you DanaB27. 

I think due to minor correction the final 2021 amendment return that was filed reflects $2080 for self and $1950 for my wife on Form 5329.

Now in the "Enter Excess Contributions" screen for Year2022 only for my self by default it shows as below.

How Much Excess to 2022?

Indicate how much of the remaining excess contribution of $71 you want to credit toward SRIDHAR's 2022 Roth IRA contributions.

Excess to Credit to 2022 Roth IRA Contributions 71.

What should I input here ?

How Much Excess to 2022? for my Wife

Indicate how much of Geetha's remaining excess contribution of $0 you want to credit toward Geetha's 2020 Roth IRA Contributions.

Excess to Credit to 2022 Roth IRA Contributions  -.

What should I input here ?

Thank you

Sri

[DanaB27]

For you, you will enter $71 and for your wife, you will enter $0. 

After absorbing your $71 excess in 2022, you no longer have an excess. Your wife’s excess was already fixed by the 2022 distribution.

@sridharm