Roth IRA overfunded

[MJM10]

Not sure this question went through

My daughter overfunded her roth ira for 2021, 2022, and 2023 because she  filed MFS which limits contributions to those earning <10K

Can this be corrected by amending these tax returns to MFJ?

Thanks, MJM

[dmertz]

If when filing MFJ MAGI would be under

$198,000 for 2021  (deadline to amend is generally April 15, 2025)

$204,000 for 2022

$218,000 for 2023

amending these tax returns to MFJ would eliminate the excess Roth IRA contributions (provided that the contributions are not excess due to having insufficient supporting compensation in the corresponding year).   Both spouses would need to agree to amend to MFJ.

Otherwise, excess-contribution penalties are due for all of these years and and the excess would need to be resolved by making a distribution equal to the amount of the excess (with no adjustment for investment gain or loss) before the end of 2024 to avoid another penalty for 2024.

[Opus 17]

I would start by asking the question why did she file MFS, and what else will change by amending to MFJ?  If there was a good reason for filing MFS, that should be considered.

For example, one reason to file MFS is if you know your spouse is cheating on their business taxes.  Filing MFJ makes the spouse equally liable for all errors, omissions and problems with the joint return, which you might not want to do.  

On the other hand, maybe filling MFS was just a misunderstanding. Filing MFJ is always allowed if both spouses agree, even if one spouse doesn't work or has much lower income, and MFJ almost always results in less tax owed or a larger refund. 

Assuming she does amend to MFJ, that would correct the issue.  (Amending from MFS to MFJ is always allowed, but amending from MFJ to MFS is not allowed after the filing deadline.)

If she does not amend, we are assuming she did not include a form 5329 to report the excess and calculate the penalties, so she would have to amend those prior returns as amended MFS returns to report the excess and pay the penalties.  The IRS will also probably assess interest since the tax is being paid late.  

[MJM10]

Good answer

Confirms what I thought

I will recommend that she and her husband amend their returns to MFJ for the 3 years specified to correct the Roth overfunding issue

No really good reason why she and her husband filed MFS except that they continued doing what they did as before they were married using different tax filing services

I gave up trying to get a live body at the IRS to answer a simple question

Thanks again MJM10

[MJM10]

Good answer and confirms what I thought.

Thanks MJM10 

[Opus 17]

@MJM10 

Note that, when amending two separate returns to one joint return, they should pick one of the separate returns (it doesn't matter which) and manually add all the information from the other spouse, including information about taxes paid or refund already paid.  It's a little more complicated than just amending without changing the status.  There is an article here.

https://ttlc.intuit.com/turbotax-support/en-us/help-article/amend-tax-return/amend-married-filing-se...

They don't need to take any other specific action with respect to the other spouse's separate return, it will be 

canceled automatically when the joint return is processed.