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How to correct now (2023) an excess non deductible IRA contribution made in 2012

Forum|Forum|3 years ago
April 8, 2023
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I am realizing that I have excess contribution on my non deductible IRA in 2012. Instead of $5,000, I have contributed $5,410. (Custodian A : $834) (Custodian B : $4,574). Since then this contribution ($5,410) has moved to Custodian C in 2014 and again to Custodian D in 2016 and remains there.

Some additional info..
(a) The Custodians A,B, C and D told me that they only keep 7 years of records in the system. I am assuming I may need to jump through hoops to get the past records prior to 7 years.
(b) I do not have access to Turbotax 2012 through 2017 software to amend the returns for those years

What are my best options to correct this ?

Best answer by DanaB27

You will need to file Form 5329 to pay the 6% penalty for each year the excess stayed in the account. You will need to download Form 5329 for each year at the IRS website. To get Form 1040-X please see the IRS website.

If you didn't make a full contribution in one of the following years then you can absorb the excess contribution in that year. If always contributed the maximum each year then you will need to take a regular distribution of $410 (without the earnings) to remove the excess contribution. You will get a 2023 Form 1099-R and this will be entered next year on your 2023 tax return and will remove the excess contribution.

"If you are filing Form 5329 for a prior year, you must use the prior year's version of the form. If you don’t have any other changes and haven’t previously filed a federal income tax return for the prior year, file the prior year's version of Form 5329 by itself (discussed earlier). If you have other changes, file Form 5329 for the prior year with Form 1040-X, Amended U.S. Individual Income Tax Return." (Instructions Form 5329)

On the 2012 Form 5329, you will enter the $410 excess contribution on lines 15 and 16 and calculate the 6% penalty on line 17. In the following years, you will enter the $410 on line 9 (from the previous year line 16) and see line 10 instructions. Enter line 16 and calculate the 6% penalty on line 17.

D

DanaB27Answer

You will need to file Form 5329 to pay the 6% penalty for each year the excess stayed in the account. You will need to download Form 5329 for each year at the IRS website. To get Form 1040-X please see the IRS website.

If you didn't make a full contribution in one of the following years then you can absorb the excess contribution in that year. If always contributed the maximum each year then you will need to take a regular distribution of $410 (without the earnings) to remove the excess contribution. You will get a 2023 Form 1099-R and this will be entered next year on your 2023 tax return and will remove the excess contribution.

"If you are filing Form 5329 for a prior year, you must use the prior year's version of the form. If you don’t have any other changes and haven’t previously filed a federal income tax return for the prior year, file the prior year's version of Form 5329 by itself (discussed earlier). If you have other changes, file Form 5329 for the prior year with Form 1040-X, Amended U.S. Individual Income Tax Return." (Instructions Form 5329)

On the 2012 Form 5329, you will enter the $410 excess contribution on lines 15 and 16 and calculate the 6% penalty on line 17. In the following years, you will enter the $410 on line 9 (from the previous year line 16) and see line 10 instructions. Enter line 16 and calculate the 6% penalty on line 17.

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