Form 5329 - Accidentally Indicated Over Contribution to 401k

Forum|Forum|2 years ago
February 18, 2024
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In Tax Year 2022 I was prompted about contributions to a Roth IRA (I believe the limit is around 7k a year). I misinterpreted this as my Roth 401k which has a much higher limit 22.5k limit. Now I'm being prompted to fill out a form 5239 for 2023. TurboTax won't let me proceed until I put in the credit value. How can I correct this mistake?

Best answer by dmertz

If you mistakenly reported your Roth 401(k) contribution as a Roth IRA contribution on your 2022 tax return, you must amend your 2022 tax return to correct the Form 5329. You'll need to prepare the From 5329 outside of TurboTax because TurboTax will not produce a Form 5329 to replace the dollar amounts with the zeroes needed to explicitly indicate the change.

then, since you actually made no excess Roth IRA contribution in 2022, in 2023 TurboTax, simply delete the amount that TurboTax shows as an excess Roth IRA contribution carried in from 2022.

LeticiaF1

If you added the Roth 401k as a Roth IRA contribution and paid the 6% penalty on your 2022 return then you will have to amend your 2022 return. On your 2023 return you can delete the entry showing you had an excess contribution in prior years.

If you had an excess Roth IRA contribution and didn't remove it by the 2022 due date then you will have to pay the 6% penalty for 2022 and also for 2023 unless you can apply the excess contribution towards your 2023 Roth IRA contributions.

If you cannot make Roth IRA contributions for 2023 and apply the excess contribution, then you will need to take a regular distribution to remove the excess contribution amount (without earnings or losses) since it is after the due date of the 2022 return to avoid the 6% penalty for 2024.

For more information read:

What happens if I made an excess Roth IRA contribution because my modified adjusted gross income is too high?

dmertzAnswer

Employee

then, since you actually made no excess Roth IRA contribution in 2022, in 2023 TurboTax, simply delete the amount that TurboTax shows as an excess Roth IRA contribution carried in from 2022.