Removals of Excess Roth IRA contributions

[tax n00b]

I've mistakenly contributed $6000 to 2021 Roth IRA and $7000 to 2022 Roth IRA as I wasn't and will not be within the contribution limits for both years. Upon finding out these errors, I've made two corresponding requests for removal of excess contributions with the brokerage firm. The removals have been processed and resulted in net losses for both contributions (ie. returns with less than $6000 and less than $7000).

I've read posts about filing for removal of excess contributions without 1099-R for the current filing year; however, my situation is a little different in that I made two separate removals for 2021 and 2022. I've contacted a representative of the brokerage firm but she couldn't know for sure if a consolidated 1099-R for both will be issued in 2023 or that two separate ones would be for the removals of 2021 and 2022 respectively. That leads to a few questions for filing this year (2021):

- Should I go ahead and just file for 2021 excluding the removal of 2021 excess contribution, wait for next year 1099-R and  amend my 2021 filing?

- If I  include the removal of 2021 excess contribution in this year, should I answer "Yes" to "Did you receive 1099-R for 2021" question even though I apparently did not (since the brokerage firm will report that in 2023)? Will it be misleading the IRS if I answer "Yes" and manually type in available data (ie. total distribution of *only* 2021 as Box 1, $0 for Box 2a as non-taxable net loss and code "PJ" for Box 7)?  Is there a need for Form 5329 at all since the removal of excess contribution resulted in a net loss?

I requested a filing extension so I have until October 17 to file 2021 taxes.

Thanks much. 

[fanfare]

@tax n00b 

return of earnings on excess is taxable in the year for which the erroneous contribution was made.

[Mike9241]

if you removed the excess contribution for 2020 after 4/15/2021 you owe a 6% penalty for 2020. after 4/18/2022 you owe another 6% penalty for 2020

if you withdrew the excess contribution for 2021 after 4/15/2022 you owe a 6% penalty for 2021

if you use TurboTax it should properly computer the penalties for each year  - see from 5329

if you have already filed for 2020 and 2021 you need to amend the to report the excess contributions not timely removed.   the IRS is notified by the Trustee of the contributions and it will check the amounts contributed to the amounts allowed.   

the loss on the withdrawal will reduce the penalty

[tax n00b]

> if you removed the excess contribution for 2020 after 4/15/2021 you owe a 6% penalty for 2020. after 4/18/2022 you owe another 6% penalty for 2021

- My excess contributions are for 2021 and 2022. I removed them just after April 18 (due to brokerage pending process).

> if you withdrew the excess contribution for 2021 after 4/15/2022 you owe a 6% penalty for 2021

- I withdrew my excess contribution for 2021 after 4/18/2022 but it is well within the 6-month allowable time window (the rules says "tax filing deadline including extentions") to avoid 6% penalty.

Excerpted from https://www.investopedia.com/what-to-do-if-you-contribute-too-much-to-your-roth-ira-4770686

"You won't face any penalties if you simply withdraw your excess contribution—plus any income it has earned in the meantime—by the due date for your tax return, including extensions."

Can anyone confirm that it's a hard date (04/18) or extended date (10/17) for removal of excess contribs without penalties?   

[fanfare]

@tax n00b 

I did not pay attention that you had no earnings on your excess contribution.

Since you removed the excess by the due date, including extensions, you don't have to file anything.

The only exception would be if you got a Retirement Savings Contribution Credit; that would have to be paid back.

[tax n00b]

> I did not pay attention that you had no earnings on your excess contribution.

> Since you removed the excess by the due date, including extensions, you don't have to file anything.

My understanding is that removal of excess contribution is reported to the IRS. Won't they (IRS) demand a corresponding indication from the tax payer if he chooses not to file anything about it? 

> The only exception would be if you got a Retirement Savings Contribution Credit; that would have to be paid back.

I got no Retirement Savings Contribution Credit nor Withholding Tax Amount, just a net loss.

Thanks