IRA contribution in error
For 2017, I have contributed to my individual IRA account 5,000 by mistake, as I did not have any earned income for 2017. I have submitted my tax return for 2017 last year and included nothing on return for 5,000 IRA contribution. For 2018 I do have substantial earned income — is there any way I can “transfer” this wrongly contributed 5,000 in 2017 toward my IRA for 2018? If yes — what is the procedure and what are the penalties?
Permalink Submitted by Alan - IRA critic on Sun, 2019-02-24 19:55
You will owe a 6% excise tax of $300 to be reported on a 2017 5329 form, and that form can be filed by itself. Since you are eligible for 2018 and have not made a contribution, you can file a 2018 5329 which will apply your 2017 excess to 2018. There will be no excise tax for 2018, and the 5329 can be filed with your 2018 return. You should not contact the IRA custodian at all as this is all documented on Form 5329, which will then show that your excess contribution has been cured.