Multiyear Roth Overcontribution

Submitted by Ryan Smith on Mon, 2023-04-17 17:15

We have a client that just let us know their income has been up and down over the last 6 years. They have been over, under and in between Roth contribution limit. See below. Do we go back and reverse all of this? Just the last few years? How should we handle this? Can you carryover from one year to the next if you do not max out the prior year? Is there a statue of limitations on this?

2016 Income 191k (range was 184-194k)
2017 under
2018 Income 192k (range was 189-199k)
2019 under
2020 fully over
2021 fully over
2022 fully over
2023 will be fully over now and going forward.

Husband Roth contributions
2016 $4400
2017 $4400
2018 $5500
2019 $6000
2020 $6000
2021 $6000 (turned age 50)
2022 $6000
2023 $750

Wife (still under 50 now)
2016 none
2017 none
2018 $1,000
2019 $1500
2020 $1500
2021 $1500
2022 $1500
2023 $375



Submitted by Alan - IRA critic on Mon, 2023-04-17 18:53

  • FIrst, they each need to either remove or recharacterize the 2022 and 2023 contributions. If they do not have traditional IRA balances, they could recharacterize as non deductible TIRA contributions and then convert them. This assumes that their 2022 return has either been filed or extended, either of which gives them another 6 months to do either of the above. If they remove these contributions and if there are any associated gains, the amount of gain will be taxable in the year IN WHICH the contribution was made. There is no longer a penalty due on any gains.
  • Then they must each start with 2016 and complete Form 5329 to address the 6% exccise taxes due. These forms are cumulative and the excess carries forward to the next year. For years they are eligible but did not contribute, the 5329 will “absorb” the excess up to the limit and that will reduce the excess balance. When these forms are fully completed, the remaining excess at the end of 2022 must be withdrawn as a regular distribution with no earnings calculation.
  • Sec 313 of Secure 2.0 provides for the filing of Form 1040 to start a 6 year SOL for excess contributions. Since this provision does not reference a tax year effective date, it is likely effective retroactively pending IRS confirmation. As such if the 2016 1040 was filed in March, 2017 the 6 year SOL has run on the 2016 excess. And if so, Form 5329 could start with 2017 and ignore the 2016 excess. 


Submitted by Ryan Smith on Mon, 2023-04-17 19:21

Thanks, what a mess.



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