Reporting Excess Roth Withdrawal after filing deadline

Submitted by T Colwell on Wed, 2016-04-13 20:06

I am uncertain how to reflect a 1099-R distribution of an Excess Roth IRA Contribution on Forms 1040, 5329 and 8606. The distribution occurred in 10/2013 for a ROTH IRA contribution made in 4/2012 for Tax Year 2011.

Among my questions:
1) Do the 2013 1099-R distribution amounts get reflected on my 2013 Return?
2) Is it necessary to amend 2011 or 2012 returns – as noted below, though the earnings may be allocable to 2012 (the year the contribution was funded), Form 8606 suggests the distributed earnings are not taxable/not included in income due to the basis existing in the Roth conversions that were undertaken (specifically in 1998).

Situation Summary:
1) Tax Year 2011 Excess Roth IRA Contribution funded 4/2012 ($4500)
2) Withdrew the Excess Contribution and Earnings 10/2013 (4500 + 535=5035).
3) Received 2013 1099-R in 2014 (Box 1=5035, Box 2a=535, Box 7=JP)
4) Form 5329 Filed with 2011 and 2012 returns with 6% penalty paid.
5) The only Roth CONTRIBUTION I have made is the one for Tax Year 2011, so my Roth Contribution basis is $4500.
6) I made two Roth CONVERSIONS – 1998 with basis of 9000; the other in 2010, with basis of 55000, of which 38000 was taxable. All Roth accounts are held at a single institution.
7) I am 54 years old.
8) No Roth IRA distributions taken with the exception of the 2013 withdrawal of the excess contribution

Could you please comment whether this appears to be right?
1) 2013 Form 1040 IRA Distributions – line 15a = 5035;
2) 2013 Form 1040 line 15b (Taxable Distributions) = 0. Calculated as follows on 5329:
a. 2013 Form 8606 line 19 (total nonqualified distrib from Roth IRAs in 2013 = 5035
b. Less: line 22 (basis in Roth IRA Contributions) = (4500)
c. Amount possibly subject to Ordinary Income taxation = 535
d. Less: Basis in ROTH CONVERSIONS = 64000
e. Form 8606, line 25 Taxable Amount = 0.
At year-end 2013, basis in Roth Contributions is reduced to 0, and Conversion basis is reduced by 535 (specifically, the 1998 Roth Conversion basis).

3) 2013 Form 1040, Line 58 (Additional Tax on IRAs – 6% on excess contrib/10% early w/drawals = 0
Calculated as the Sum of Form 5329 Parts I and IV (lines 4 and 25):
a. Part I lines 1 – 4 are all zero as line 15b indicated none of the early distribution was taxable income.
b. Part IV – Additional Tax on Excess Contribution to Roth IRAs
– Line 18, excess contributions from 2012 5329 line 24 = 4500
– Line 21, 2013 distributions from Roth IRAs = 5035
– Line 24, Total excess contributions = 0 after return of excess contribution
– Line 25, Additional Tax = 0.

Thank you for your indulgence! This is a great message board, and your help is very much appreciated by many!!



Submitted by Alan - IRA critic on Wed, 2016-04-13 22:51

First, your questions:1) No. The 1099R is coded JP meaning that the 535 in earnings is taxable in 2012 because the custodian coded the 1099R to show removal of a 2012 contribution (Code P is for 2012). Are you sure that you did not make a contribution for 2012? Note that the deadline to remove a 2011 excess contribution with earnings is 10/15/2012. This 1099R is not shown on your 2013 return because it applies to your 2012 return.What this boils down to is that since the custodian evidently returned a 2012 contribution (whether excess or not), your 2011 contribution (if you actually made one FOR 2011) is still in the Roth generating a 6% excise tax every year. Did you keep your 5498 forms showing the years for which you made IRA contributions? Those would provide some answers to this.2) Not applicable – see above. When did you file your 2012 return? If you filed on time, then 2012 becomes a closed tax year in 2 more days meaning you escape reporting that income.3) Again, not applicable since the return of contribution is taxable in 2012, not 2013. You indicated that you filed a 5329 and paid the 6% excise tax for 2011 and 2012. This indicates that at the end of 2012 you thought that your 2011 excess was still in the Roth. If so, then you owe the 6% excise tax on this amount for 2013, 14, and 15 as well. Form 5329 allows you to eliminate an excess contribution if you are eligible to make a Roth contribution in a year that you did not make. Possibly, if you were eligible in 2013 and did not make a Roth or TIRA contribution that year, the form will eliminate your excess in 2013 and end the 6% taxes. Right now, you still have a regular Roth contribution basis of 4500 IF your 2012 contribution was applied to 2011. But perhaps you intended to make it for 2011 and the custodian assigned it to 2012 instead. If you are sure you only made ONE regular contribution, then this may be what happened. Again, look for Form 5498 for any of those years.

Submitted by David Mertz on Wed, 2016-04-13 23:18

I used to believe that the deadline for making a return of contribution was the due date of the tax return of the year *for* which a contribution was made.  Seems to make sense.  However, after reading various Return of Excess Contribution forms, section 408(d)(4) and quotes from several IRA-custodian reps, I now think that the deadline is the due date of the tax return for the year *in* which the contribution was made.  I think it was the result of adding the provision that allows a contribution made between January 1 and the non-extended due date to be designated as being for the prior year, and not modifying the language in section 408(d)(4) that refers to “any contribution paid during a taxable year to an individual retirement account .”  To me, “paid during a taxable year” means the year *in* which the contribution was made.  (Language in section 223 for HSAs is clearer in that the return of excess contribution must be made from an HSA account by the due date of the tax return for the year “for” which the contribution was made, but that’s not the section that applies to IRAs.)

Submitted by Alan - IRA critic on Thu, 2016-04-14 01:10

  • Yes, you are correct. Therefore, the OP is probably correct that the excess contribution was for 2011 and was appropriately corrected. As such, no excise taxes are due for 2011 or any subsequent year on the 2011 contribution. Still, the income is taxable in 2012 as stated, not 2013.
  • Another question regarding the excise taxes paid which were not due. There is no statute of limitations on excess contributions, but I do not know whether that means that tax years close with respect to excise taxes paid which were not due. Seems equitable that if the IRS can assess excise taxes without time limit, the taxpayer should be able to file an amended return for overpayment of such excise taxes. May be worth a try and interest on these payments should apply as well.
  • Perhaps this explains why the IRS does not promptly contact taxpayers regarding excess contributions. Form 5498 reports contributions FOR specific years without regard for when they were made (except SEP contributions). Therefore, an excess contribution could be corrected as late as 21 months after the end of the year those contributions were FOR per Form 5498.

Submitted by T Colwell on Thu, 2016-04-14 15:19

 Thank you for your thoroughness in replying to my situation.   1)  The Year of my Roth Contributions?  My 2011 Form 5498 shows a Roth contribution for $4500 (T Rowe) – this would be an excess contribution that was funded in April 2012, and it is the only Roth contribution that I have ever made, because I am typically ineligible.  The other Roth balances I have arise from 1998 and 2010 conversions.  I did make a 2012 Traditional IRA Contribution, however it was to a separate financial institution (Vanguard).                             2)  The excess contribution withdrawal occurred October 10, 2013 (if it makes any difference to how things get reported, the 2012 return was filed on/about 10/15/2013).   The 2013 1099-R Box 7 Code JP indicates the $5035 distribution included return of an excess contribution ($4500), so I think the 6% excess contribution penalty should cease going forward.  I am typically ineligible to do Roth Contributions so that is the only one I have ever made (other Roth balances are from 1998 and 2010 conversions), and T Rowe brokerage statement shows the distribution in two pieces – return of the excess contribution, and separately, return of the associated earnings.                —Q1.  Re:  Taxes on the Earnings:  The instructions say that earnings are allocable to the year of the contribution (2012 presumably), so I reflect the $535 on Form 1040, line 15b, and the 10% penalty on the earnings ($54) on Additional Tax on IRAs, line 58.  Correct?                 —Q2,  Re:  Reporting Return of the Excess Contribution:  Although the instructions clearly say earnings are allocable to the year of the contribution, they seem less clear with respect to the return of the contribution itself.  Does this also get reported on the 2012 Return ( forms 1040, 8606 and 5329), or do they remain on the 2013 forms since the distribution was received in 2013?  For instance:   

  1. Form 1040 Line 15a instructions under Exception 2, #5 reads, “5. You made excess contributions to your IRA for an earlier year and had them returned to you in 2012.”  My distribution occurred 10/10/2013 (for the April 2012 contribution representing my  2011 Roth IRA) – is it considered returned to me in 2012 for purposes of this amended form? 
  2. Form 8606, Line 19 “Enter your total nonqualified distributions from Roth IRAs in 2012…”

       Would I report $5035 on each of these lines on the Amended 2012 Forms, or on the 2013 Forms?  If I were to report them on the 2012 Forms, it would cancel out the 6% penalty relating to the excess contributions. Do the Ordering Rules for Distributions from Roth IRA come into play at all, affecting the taxability of the distribution (contribution and earnings)?  I am 54.           

Submitted by David Mertz on Thu, 2016-04-14 16:00

  • Except for the $535 in earnings distributed, the return of contribution makes it as if the contribution never happened.  It eliminated all excess contribution penalties that had been due as a result of the original $4,500 contribution.  Unfortunately, with 2011 being a closed tax year for filing for a refund, it seems that you cannot amend your 2011 tax return to receive a refund of the previously reported excess contribution penalty.
  • The $535 of earnings is reportable on your 2012 tax return and is subject to a 6% early-distribution penalty.  However, because the excess contribution for 2011 was resolved, there is no excess contribution that carried forward to 2012.  Since 2012 Form 5329 Part IV of excess Roth IRA contributions begins with line 18 where you enter the amount from line 24 your 2011 Form 5329, it may be wise to file an amended 2011 Form 5329 showing no excess contribution even if the penalty paid cannot be refunded.  You’ll at least want to include in your explanation for the 2012 amendment that you actually did not have an excess contribution for 2011 despite what was previously reported on your 2011 tax return.
  • Regarding your question 1, it’s Exception 2, #4 that applies, not #5.  $5,035 should appear on line 15a and only $535 should appear on line 15b.
  • Regarding your question 2, Form 8606 does not apply.  This is a return of contribution before the due date of your 2012 tax return, not a regular, nonqualfied distribution.
  • Your amendment to the 2013 tax return is only to zero out Form 5329 since there was, in fact, no excess contribution carried into 2013, the same as change that you make on your 2012 Form 5329 Part IV.

Submitted by Alan - IRA critic on Thu, 2016-04-14 16:44

  • Q1 – you are correct. The 2012 return must be amended to report the 535 in taxable income from the 1099R. Penalty goes on line 58 – unless you qualify for a penalty waiver based on certain activities in 2012 (higher education costs, first home, certain medical costs etc). If so you can enter a waiver code on Form 5329 and eliminate the penalty.
  • Q2 – all on the 2012 1040X. Line 15a will be 5035 and 15b will be 535.There is no need for an 8606 to report a corrective distribution as applies for other Roth distributions, but the line 15 reporting instructions are included in the 8606 Inst. Since your received the corrective distribution by the extended due date for the 2012 return, you should enter “Filed pursuant to Sec 301.9100-2” on the top of the 2012 1040X. All of this depends on having filed a timely extension for your 2012 return by 4/15/2013, otherwise you cannot use the extended due date (10/2013) and you must use your normal due date instead (4/15/2013) as the deadline for the corrective distribution of a 2012 contribution.  None of this goes on the 2013 return.
  • Again, no 8606 to report the distribution. See the wording for Part III of the 8606 on the form where it states that the form is not used to report the return of certain contributions.
  • Ordering rules do NOT apply to the return of contributions because the return is of a specific contribution made. This is another reason that Form 8606 does not apply.With your 2012 1040X you should also request a return of the 2012 6% excise tax that you already paid. I would attach a corrected 5329 showing no excess amount, but because the excise taxes build on those from prior years, you should also do a 2011 1040X for the sole purpose of requesting a refund of the 2011 6% excise tax. Indicate that the excess Roth contribution was removed by the extended due date for the year IN WHICH the 2011 contribution was made. You might also include a copy of the 1099R with these 1040X.
  • If you are deep into your 2013 return filing, might as well complete that first. Again, hope you filed your 2012 extension on time or all of this could unravel.

Submitted by T Colwell on Thu, 2016-04-14 17:31

Thank you for the information….

  • 1) Re 2nd bullet – thanks for the suggestion re filing an amended 5329 for 2011.  The amended form would only include the lines where the amounts change – zeroing out lines 23 and 24 where 4500 currently appears; or .  would I also show the original entries for line 18 (0) and line 25 (270)?     I assume I would not change line 20,  “2011 distributions from Roth IRAs” to show 4500 since that occured in October 2013.  I’ll include an explanation that the excess contribution was reversed, and the amendment filed so that line 24 on 2012 Form 5329 indicates no excess contributions exist anymore.
  • 2)  Re your 3rd bullet – I thought Exception 2, #5 might be more appropriate because Exception 2, #4 may not apply.  The 2011 Roth IRA contribution and related earnings were NOT returned to me by the due date (including extensions) of my tax return for that year.  They were not returned to me until October 2013.  Unfortunately, none of the exceptions listed appear to reflect what happened.  Regardless of which # is used under Exception 2 (if its applicable at all), the instructions suggest 15a should be 5035, and 15b is determined on Form 8606. 
  • 3) It seems as though there should be a form somewhere that I would enter the return of the excess 2011 Roth IRA Contribution, thereby reporting the reduction in basis to 0 for Roth IRA Contributions.  That has been done effectively by amending the 2011 5329, line 24?

Thanks for your help!  I’ve learned my lesson re letting things slide just because I’ve overpaid by the due dates…  

Submitted by Alan - IRA critic on Thu, 2016-04-14 19:11

  • For the 2011 5329 (pull up actual 2011 edition of form), put 0 on all the lines in Part IV. On the 1040X explain that the 2011 excess Roth contribution made in 2012 was timely corrected per Sec 301.9100-2 and the excise tax was never due. Also, state that a 1040X is being filed to request a refund for an excess contribution excise tax which is not subject to a statute of limitations. Otherwise, they may refuse to accept the 1040X, and they still might. I am just guessing that because there is no time limit for the IRS to assess the penalty, that there should be no time limit to request the refund, but I could be wrong about the refund.
  • Yes, the instructions are confusing for the 1040, so I am going by the 8606 Inst. “Return of IRA contributions” which indicate that 15a and 15b would be completed for a contribution made in 2012 and returned by the extended due date for the 2012 return. Form 8606 does not apply to a return of contributions by the extended due date. These are not treated as distributions subject to the ordering rules and this is stated on the 8606 itself and in the 8606 Inst. 15b comes directly off the 1099R box 2a, the taxable earnings are NOT computed on Form 8606.
  • The corrective distribution is reported on lines 15a and 15b. Since a contribution has been removed, it is treated as never made and therefore no longer adds any basis to your regular Roth IRA contribution balance. You should keep all your 5498 forms, but once you remove a contribution, the 5498 is never revised, so make a note on your copy of the 5498 that the contribution has been returned, so you will not count it as basis later on. The 5329 for this section only serves to assess the excise tax from year to year or reduce the balance of the excess.
  • Remember that you also need to file a 5329 with the 1040X for 2012 to request a refund of the 2012 excise tax.

 

Submitted by David Mertz on Thu, 2016-04-14 23:39

  • The reason that the statute of limitations usually does not start for an excess contribution is that usually no Form 5329 has been filed to start the clock; it’s the filing of Form 5329 that starts the statute of limitations clock.  In this case there was a 2011 Form 5329 filed to start the clock, so I suspect that no refund will be forthcoming for the amendment to remove the 2011 reporting of the excess contribution.
  • If this reasoning is correct, the deadine for filing an amended 2012 tax return to obtain a refund of the 2012 excess contribution penalty is fast approaching, assuming that the 2012 tax return was filed by April 15, 2013.

 

Submitted by paul anna on Sun, 2017-10-01 03:12

Recently, I discovered that I was not eligible to make ROTH IRA contributions since I retired in 2014. However, I did contribute for 2015, 2016, and 2017 before I realized this. All contributions and earnings have been removed from our ROTH accounts. I know form 5329 needs to be submitted for 2015 and 2016 to show the 2015 excess contribution and 6% penalty. The paperwork from my custodian only shows a taxable amount for 2017 an I do not have a 1099R for reference on what to do.1) Does my 2015 return have to be amended?2) is my only entry on 5329 (2016) lines 18, 24 & 25 to pay the 2015 excess penalty again?3) Is there any other paperwork requirements for thi situation? 

Submitted by Alan - IRA critic on Sun, 2017-10-01 03:52

  • To further clarify this situation, did you just recently remove these contributions?  If so, the 2015 contribution would be distributed without earnings, but the last two years would be distributed with their allocated earnings. The earnings distributed with these last two years would be taxable in the year IN WHICH you made those contributions. The 1099R coding will identify that year. 
  • Once you clarify the questions above, I can advise how to report them. I expect that the 2015 5329 can be filed by itself to pay the 6% excise tax. You will have to amend 2016 IF there are taxable earnings returned on your 2016 contribution that you made IN 2016 you will have to amend your 2016 return to report those earnings as income and pay 10% penalty on those earnings. For any earnings returned with your 2017 contributions, they will be taxable when you file 2017. You will also need to file a 2016 5329 to pay the 6% excise tax on your 2015 amount which was still in the Roth at 2016 year end.
  • You will also need to file Form 8606 for 2017 to report the distribution of your 2015 excess amount, although it will not be taxable. The other two years are not reported on Form 8606 since those excess contributions were returned with earnings. Finally, you will have a 2017 Form 5329 to report that the excess has been eliminated by your withdrawal. No excise tax due for 2017. 
  • Please advise if the facts of these contributions and distributions differ from the above.

Submitted by VICTOR LIN on Sun, 2018-04-22 21:57

I made a Roth IRA contribution and my fund of $5,500 was made available on April 19, 2016, which the bank designated it as the contribution for tax year of 2015.         Then I made another Roth IRA contribution and my fund of $5,500 was made available on April 20, 2017, which the bank designated it as the contribution for tax year of 2016.       I have been a student (age 27) and I was advised that even though I had Adjusted Gross Income, but I did not have any taxable compensation (no W2 income) to make the Roth IRA contribution. Once I realized I was not eligible, I immediately withdrew my Roth IRA contributions for these two years, and the Roth IRA fund ($11,000 + $200 interest) came out on April 3, 2018.        Could you please advise how do I report on 1040X & 5329 for the tax years of 2015, 2016, and 2017?

Submitted by Alan - IRA critic on Mon, 2018-04-23 04:29

  • I don’t know why any earnings were distributed. For excess contributions for 2015 and 2016 you would just withdraw the 11,000., no interest. Earnings would be withdrawn if your contribution was for 2017 or 2018. Was it your idea to withdraw earnings, or did the Roth custodian calculated that $200 amount?
  • You do need to file Form 5329 and pay the 6% excise tax for 2015 on 5500. Also a 5329 for 2016 and pay the 6% excise tax on 11,000. Finally, another 5329 for 2017 paying the 6% excise tax on 11,000. That’s a total of 1,650 for the 3 years. For your 2018 return you will have to report a distribution of 11,200 on Form 8606. If your only Roth contributions were these 11,000, then the 200 would be taxable and subject to penalty. You would also need a final 5329 for 2018 indicating a withdrawal of the 11,000 which would eliminate your excess amount and no excise tax would be due for 2018. Download the IRS instructions for Form 5329, the final page which tells you how to complete the 5329 forms. There is only 4 lines, but the figures to enter on those lines is not intuitive. Once you do the 2015 form, the others will be easy.

Submitted by VICTOR LIN on Tue, 2018-04-24 03:29

  • ·         Thank you for the prompt reply.
  • ·         I wish to compare my case with trcolw’s case earlier.
  • ·         Trcolw’s case is “The distribution occurred in 10/2013 for a ROTH IRA contribution made in 4/2012 for Tax Year 2011.” And the excess contribution was for 2011 and was appropriately corrected. As such, no excise taxes are due for 2011 or any subsequent year on the 2011 contribution.
  • ·         My case is “The distribution occurred in  April 3, 2018 for a ROTH IRA contribution made in 4/2017 for Tax Year 2016” Should we consider the excess contribution was for 2016 and was appropriately corrected? As such, no excise taxes are due for 2016 or any subsequent year on the 2016 contribution?
  • ·         As for the interest of $200, I thought I needed to withdraw both the excess contribution and its earnings, but I am not sure now if I need to.

Submitted by Alan - IRA critic on Tue, 2018-04-24 15:51

  • The deadline for timely removal of an excess contribution is a source of confusion due to the IRS use of the term “during the tax year”. When a prior year contribution is made (4/17 for tax year 2016) it is treated as having been made on the last day of the preceding taxable year per Sec 219(f)(3).  Therefore, when the IRS states “during the tax year” of the contribution the year they are referring to is year FOR WHICH the contribution is assigned. In your case as well as the original poster, the deadline to have the excess returned with allocated earnings is 10/15 of the year for which the return is due for the year the contribution was assigned to. That deadline for your 2016 contribution would have been 10/15/2017, so you missed the deadline and owe the 6% excise tax for 2016 and 2017. The custodian should not be coding your 4/3/2018 distribution as the return of a 2016 excess, the 1099R should just show a normal distribution. You do not withdraw earnings in this situation, and the distribution of the excess amount (without earnings) will eliminate your excess, but not until 2018. Your excise taxes end with 2017.
  • You should check Form 5329 closely because proper completion allows you to apply the excess for 2016 to the 2017 tax year IF you were eligible for a contribution in 2017 that you did not make. In that case your excess would have been eliminated in 2017 and you would not owe the excise tax for 2017, just 2016. 
  • IRA custodians should know these rules, so if you asked your custodian this month to remove a 2016 excess contribution, they should NOT calculate earnings or code the 1099R as a return of an excess contribution. What you did was to withdraw an excess contribution AFTER the due date and in that case the earnings do not get withdrawn. 
  • To add to the confusion, in trcolw’s case it sounds like the custodian got confused and coded the 1099R improperly as if he has met the deadline, when in fact his distribution was like yours – after the tax due date for the year FOR WHICH the contribution applied.  You may want to call your custodian and ask them how your 1099R will be coded. This is also affected by whether you specifically requested a return of your 2016 contribution or just asked for a dollar amount.

Submitted by VICTOR LIN on Wed, 2018-04-25 04:52

  • To estimate taxes for the tax years of 2015 and 2016, I used one of the IRS’ authorized e-file software, which I call it “ABC Free File” for discussion purpose, and it did not give me any warnings that dis-allowed the contribution of $5,500 to my Roth IRA; instead, “ABC Free File” used the $5,500 Roth IRA contribution to calculate the Credit for Qualified Retirement Savings Contribution (Form 8880) for both of my cases.
  • On the http://www.irs.gov it says “You can avoid many common errors by filing electronically. IRS e-file is the most accurate way to file your tax return.” And ““You don’t have to be an expert on taxes. Free File software can help walk you through the steps and help you get it right,” said John A. Koskinen, IRS Commissioner.
  • When I follow IRS’ suggestion to amend my 2015 and 2016 tax returns, using “ABC Free File”, I will have no 6% exercise tax due for tax years of 2015 and 2016, and therefore no 6% exercise tax for 2017. This is quite a confusing situation. Could you please comment on this?

 

Submitted by Alan - IRA critic on Wed, 2018-04-25 19:08

  • The Savers credit cannot be based on an excess contribution that is later removed by the due date with earnings. However, as in your case if the excess contribution is NOT removed until after the due date the situation is different. In that case, you DO get the credit for the (2016) contribution, but you also have to report a REDUCTION of contributions on later Forms 8880 for the removal of the excess amount (without earnings) after the due date. This reduction applies to 3 total years, so you still get the credit for the 2016 contribution year, but then your credit may be impaired for 2017-2020 by having to report the distribution done 4/18.
  • Owing the excise tax for 2016 and 2017 does not affect the savers credit for 2016, so your 1040X for 2016 will not result in the loss of the credit.
  • If you entered all your income into a tax program for 2016 and it did not flag your Roth contribution as excess, there is something amiss. It should have told you that your Roth contribution was excess.

Submitted by VICTOR LIN on Thu, 2018-04-26 00:37

  • Yes, for example, back in 4/2016, when I used the program to estimate the tax for 2015 return, on Form 1040, I had “0” on Line 7 and I filled all other incomes in. Then I contributed $5,500 Roth IRA for the tax year of 2015. There was no flag that my Roth IRA contribution was excess. Instead, it calculated the credit in Form 8880 for me. In this case, do you think the program should fill out Form 5329 for me to complete my 2015 return?
  • The same question, but it is NOW, that I want to amend my 2015 return, on Form 1040, I have “0” on Line 7 and I fill all other incomes in. Then I contribute $5,500 Roth IRA for the tax year of 2015. There is no flag that my Roth IRA contribution is excess. Instead, the program calculates the credit in Form 8880 for me. In this case, do you think the program should fill out Form 5329 for me to complete my 2015 amended return?
  • For your information, in the above 2 cases, there was no Form 5329 being filled out by the program for me.

 

Submitted by Alan - IRA critic on Thu, 2018-04-26 02:24

In my prior post, I only looked back as far as your 4/23 post, so did not see that you also had an excess contribution for 2015. All the observations are the same, except the excess considerations obviously start in 2015, not 2016. It could be that this tax program gives you the savers credit until you actually remove the contribution before the due date, which did not happen. But the program should have alerted you to the excess contribution irregardless of the savers credit. You may have to file the 1040X on paper or experiment more with the tax program. These programs are not all identical. It is vital that you file the 5329 forms starting with the oldest excess contribution and work forward. 

Submitted by VICTOR LIN on Thu, 2018-04-26 03:03

I believe the program failed to fill Form 5329 for me for my 2015 return and 2016 return when I made the excess Roth IRA contributions in these two years, and therefore I did not know I made excess Roth IRA contribution which is subject to 6% excerse tax penalty each year.

Submitted by VICTOR LIN on Thu, 2018-04-26 04:00

  • When we complete the tax return using the program and the tax return has no Form 5329 attached to it, the tax payers will not know they owe excerse tax. In other words, the tax payers do not know they owe 6% excercise tax year after year until one day a tax expert tells them that it was wrong.
  • On the http://www.irs.gov website, it says “You can avoid many common errors by filing electronically. IRS e-file is the most accurate way to file your tax return.” And ““You don’t have to be an expert on taxes. Free File software can help walk you through the steps and help you get it right,” said John A. Koskinen, IRS Commissioner.
  • By following the IRS suggestions and using IRS authorized e-file program, we get the result which is not correct. What do we do?

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