Past Years Excess Roth Contribution Penalty – How to file

Submitted by Cai Mie on Fri, 2022-10-14 01:23

I figured out my total 6% penalty for ineligible/excess contributions for 2013-2106 where I just corrected/withdrew the contribution amount last year 2021 before 2020 tax deadline (and thus do not have excess attributed to 2021). I’m now e-filing my 2021 return which doesn’t include value to a 2021 5329 since I had excess distributed, but still I need to report the excess and penalty for each 2016-2020 on respective year’s 5329 forms. What’s the best way to file – ideally electronically – all of these past year forms as I don’t seem to be able to include them with the 2021 e-filing? I already included the figured 6% tax penalty amount in my 2021 tax payment. Also, how specific (or not) should the letter explanation be? thank you



Submitted by Alan - IRA critic on Fri, 2022-10-14 02:21

  • You will have to paper file the 5329 for years 2013-2020, and these 5329 forms are cumulative. As the total excess amount grows each year, the 6% excise tax will grow as well through 2020. Generally, because a 5329 is a separate return in itself, you can file them separately without a 1040 X each year. Of course, the 2020 5329 must dovetail with the 2021 5329 you already filed.
  • The 5329 “self corrects” excess contributions in some cases, either by absorption or by distribution. Absorption only works if you were actually eligible in some prior years and did not otherwise contribute, and distribution credits any Roth distributions you might have taken before the one in 2021. Be totally sure that these amounts are actually excess contributions before paying these excise taxes.
  • Note that any excise taxes you will be paying late can result in a late interest billing from the IRS.
  • You do not need a letter of explanation, as the 5329 forms are self explanatory. The IRS does not care why these excess contributions were made, and there is not way to request a waiver of these taxes. You can send all these 5329 forms in a single envelope to the IRS processing center for your residence location.

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