Timing of the removal of excess Roth contribution and non-deductible IRA contribution/conversion

Submitted by Christopher Combs on Fri, 2020-01-10 20:13

Dear Alan et al,

Our client Angie made a $6,500 excess contribution to her Roth IRA for the 2018 tax year. Our plan is to remove the $6,500 contribution, file the Form 5329 for the 2018 tax year, and file a Form 8606 for the 2020 tax year (the year of the $6,500 distribution). Here are some questions:

1. Does a Form 5329 also need to be filed in both 2019 and 2020?

2. Does a Form 8606 need to be filed in 2019?

Our plan is to make a $14,000 contribution to her non-deductible IRA for 2019 & 2020 and subsequently convert the entire IRA balance over to her Roth.

3. Does this interfere with correcting the 2018 excess Roth contribution?

Thanks in advance,

Chris



Submitted by Alan - IRA critic on Fri, 2020-01-10 20:58

  1. Yes, a 5329 for 2019 may or may not absorb the 2018 excess. It obviously will not if a 2019 ND TIRA contribution will be made. Therefore,  another 6% excise tax is owed. If the 6500 is distributed in 2020, a 2020 5329 is also needed to show that the excess has been removed. No 2020 excise tax.
  2.  No 8606 for 2019 except to report the 7000 ND TIRA contribution.  For 2020 to report the distribution and 2020 ND contribution as well as 2020 conversion.
  3.  No, not unless the value of the Roth not counting the conversion is less than 6500, as that would cause some of the conversion to be distributed.

Add new comment

Log in or register to post comments