Resolving excess Roth IRA contributions for 2011 to 2013?
Hello. From 2010 to 2014, I lived outside of the U.S. I filed the Foreign Earned Income Exclusion (Form 2555) for the 2011, 2012, and 2013 tax years. As a result, I did not pay federal taxes for those years. For each of those years, I contributed $5,000 to my Roth IRA, not knowing that this would result in a 6% excise tax. I did not receive a notice from the IRS about the excess contributions. The only subsequent contribution I made to my Roth IRA was in 2016, when I contributed $5,500.
It is my understanding that my excess contribution for 2011 was absorbed in 2014 and that my excess contributions for 2012 and 2013 were absorbed in 2015 and 2017, respectively. Is this correct? If so, do I simply file three Form 5329s with my next tax return? Is there anything else I should know about the process? I appreciate whatever information or advice you can provide. Thanks!
Permalink Submitted by Alan - IRA critic on Sun, 2025-08-24 10:45
I posted this answer on another forum but had to slightly amend those figures. The amended amounts are included below.
“You seem to understand the corrective process, and how absorption of excess amounts on Form 5329 works. The following assumes that you were fully eligible (earned income with no income phaseouts) for the years in which the excess amounts were absorbed.
Excess contributions had no statute of limitations (SOL) unless Form 5329 is filed for the excess year, so even though you absorbed the excess amounts in 2017, the SOL for the prior years remains open until you file the 5329 forms as indicated.
If you wanted to resolve this, you would have to file a 5329 and 1040X for each year 2011-2017 and pay the 6% excise tax for the excess not absorbed in that year.
2011 – 5000 excess
2012 – 5000 excess added, 10,000 cumulative
2013 – 5000 excess added, 15,000 cumulative
2014 – 5500 excess absorbed, 9,500 remaining
2015 – 5500 excess absorbed, 4,000 remaining
2016 – 5500 contributed, 0 absorbed, 4000 remaining
2017 – remaining 4000 absorbed
Total amount subject to 6% = 47,500 @ 6% = 2,850 to which the IRS will likely add a ton of late interest assessments.”
Permalink Submitted by L L on Mon, 2025-08-25 20:09
Thank you very much for that explanation.
1) Do I need to remove $15,500 in excess contributions from the Roth IRA as part of this process?
2) Might you have an idea as to roughly how much the IRS’ late interest assessments would run? I read online that A First Time Abatement is possible.
3) Are the associated penalties and assessments still accumulating with each passing year?
4) The Roth IRA is worth about $40,000 and I earned only about $20,000 a year during the years in which I overcontributed. If the taxes and penalties and cost to hire an accountant are going to amount to more than $10,000, perhaps I should just close the account. I welcome whatever suggestions you may have. This is a nerve-wracking situation that is now consuming all of my attention
Permalink Submitted by Alan - IRA critic on Mon, 2025-08-25 22:38
No, because you absorbed all your excess contributions. No need to take any distributions.
Cannot provide a reasonable estimate, but it would be a function of the varying rates that applied since 2011. These rates would be applied to the excise taxes due over the entire time, up to the date you paid them.
Just the interest charges would continue to compound until the excise taxes are paid.
Closing the account would not be beneficial, rather it would be damaging because account closure in no way affects the excise taxes that are already due. The excess contributions have been absorbed and there are no longer any excess contributions in the Roth. That said, until the appropriate 5329 forms are filed which documents how much of the excess was absorbed each year, the IRS would not recognize the absorption, but the IRS would also not likely detect the excess contributions in the first place because they have never effectively monitored excess contributions, as your experience illustrates.
Properly paying the excise taxes and filing those 5329 forms with 1040X for those 7 years (2011-2017) is the only solution to the problem if you don’t roll the dice and do nothing. Again, forget about closing your Roth as that would do nothing to alleviate this dilemma.