Excess Roth Contribution for 2019 and 2022
Hi,
I just realized that my husband and I contributed to our Roth accounts in 2019 and 2022 when our MAGI exceeded the upper income limit.
In reading previous posts on this forum I believe I need to do the following – is this correct?
1) Withdraw the $13,000 in contributions for 2019 ($6,000 for my husband and $7,000 for me).
2) File form 5329 for 2019 and pay 6% excise tax: $13,000*.06 = $780
3) File form 5329 for 2020 and pay 6% excise tax: $13,000*.06 = $780
4) File form 5329 for 2021 and pay 6% excise tax: $13,000*.06 = $780
5) Withdraw the $13,000 in contributions for 2022 ($6,000 for my husband and $7,000 for me).
6) File form 5329 for 2022 and pay 6% excise tax: $26,000*.06 = $1560
7) File form 5329 for 2023 and pay 6% excise tax: $26,000*.06 = $1560
8) File form 5329 for 2024 and pay 6% excise tax: $26,000*.06 = $1560
Am I correct on #8 – I still need to pay the entire $1560 in 2024 excise tax even if I remove the $26,000 this month?
I can not file form 5329 for 2024 and pay the final $1560 until I do our 2024 taxes next year – correct?
Permalink Submitted by Alan - IRA critic on Sat, 2024-02-24 02:22
Note that the 5329 must be filed separately for each spouse, but your totals are correct. SInce you will have withdrawn the entire 26,000 by the end of 2024, there will be no excise tax due for 2024, but you must file the 5329 forms for 2024 to document that you have removed the prior excess amounts. You will also each have to file an 8606 for 2024 to report the distributions, but since they are coming from your regular Roth contribution basis, the distributions will be non taxable.
Since you will not incur another excise tax until 2025, you might wait till later in the year to make the distributions since any gains generated on the contributions will stay in the Roth accounts.
The IRS may bill you late interest on the late payments of the excise taxes owed.
When you complete the 5329 forms, be aware that these excess contributions could have been “absorbed” if in 2020, 2021, or 2023 you were eligible to make Roth contributions that you did not make. Just follow the instructions for each line on the 5329. Those forms should be filed with a 1040X for the prior years.
Permalink Submitted by Ann Chavarria on Sat, 2024-02-24 02:29
Thank you Alan! I really appreciate your help!