Roth IRA excess contribution in 2018

Submitted by alberto vega on Thu, 2019-12-05 20:05

Client age 68 in 2018 made a $ 1,500 Roth IRA contribution for year 2018. They filed the
tax return for 2018 and paid the $90 penalty by filing FORM # 5329 because their AGI was too high

In September 2019 they withdrew the $1,500 only- no earnings on that amount were withdrawn.
1. Do they have to withdraw the earnings? If so how they report that withdrawal

2. How is that $ 1,500 is reported on the 2019 tax return. Which forms, if any they need to file in 2019.



Submitted by David Mertz on Thu, 2019-12-05 20:21

  1. No. Withdrawal of earnings and paying the 6% excess contribution penalty are mutually exclusive.
  2. The regular $1,500 distribution in 2019 from the Roth IRA will be reported on a code T or Q 2019 Form 1099-R depending on when the client first opened the Roth IRA.  If the client made their first contribution to any Roth IRA for a year prior to 2015 this distribution is a qualified distribution and is not reportable on Form 8606, otherwise Form 8606 Part III must be completed to show that the taxable amount of this distribution is $0.  In either case the distribution will be included on 2019 Form 1040 line 4a but will be excluded from line 4b.  2019 Form 5329 Part IV must also be completed to show on line 18 the $1,500 excess contribution carried in from 2018 and to show on line 20 the $1,500 regular distribution that reduces the excess to zero.

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