Excess Roth Contributions
I hope you can help. In 1999 I opened up a Roth IRA account. We moved overseas shortly thereafter. In 2008-10, I made additional contributions to this account. I just discovered this year that because we use the foreign earned income exclusion, I was not eligible to contribute anything during these years. I am trying to figure out if it’s necessary to correct this after all these years, and if so, how? The instructions on the form 5329 are very confusing.
Thanks for your help!
Permalink Submitted by Alan - IRA critic on Sat, 2018-06-16 22:03
Since 2010, were you eligible to contribute to a Roth, but contributed less than your limit? If so, those unused contributions would absorb prior year excess amounts. So would any distributions you took since then. But you are looking at a 6% excise tax for each year the accumulated excess remains in your Roth, and the remaining excess as of today should be distributed to put an end to the annual excise tax liability accruals. The distribution of the excess would not be taxable, and all earnings remain in the Roth. So the cost would be the 6% annual excise taxes starting in 2008 plus possible interest on late payment of the excise taxes. So you each have this excess Roth exposure?