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February 15, 2022
Question

If I made excess Roth IRA contributions in previous years (2019

  • February 15, 2022
  • 1 reply
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I over-contributed to my Roth IRA for 2019, 2020 and 2021. For 2021 contributions, I have recharacterized the contributions and earnings into a traditional IRA

1 reply

February 15, 2022

You have to verify if you have paid the 6% excess contribution penalty in 2019, 2020, and 2021 for the 2019 and 2020 excess contributions. You can see the 6% penalty in part IV of Form 5329. If you didn't pay the penalty then you will have to amend the 2019 and 2020 tax returns. Please see How to amend (change or correct) a return you've already filed.

 

You should remove the excess 2019 and 2020 contributions (without the earnings) by December 31, 2022, to avoid paying the 6% penalty in 2022 and future years.

 

To create Form 5329 for the 6% excess contribution penalty in TurboTax and to enter your recharacterization please follow these steps:

 

 

  1. Login to your TurboTax Account 
  2. Click on "Search" on the top right and type “IRA contributions”
  3. Click on “Jump to IRA contributions"
  4. Select “Roth IRA
  5. Answer “No” to “Is This a Repayment of a Retirement Distribution
  6. Enter the Roth contribution amount 
  7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
  8. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
  9. On the "Do you have any Excess Roth Contributions" answer "Yes"
  10. On the "Enter Excess Contributions" enter the total excess contribution from 2019 and 2020
  11. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (if you are thinking about doing a backdoor Roth. If you have a retirement plan at work and are over the income limit it will be nondeductible and you only get a screen saying $0 is deductible)

 

You will get Form 1099-R in 2023 for the recharacterization with code R-Recharacterized IRA contribution made for 2021 and this belongs on the 2021 return. But a 1099-R with code R will do nothing to your return. You can only report it as mentioned above. Therefore, you can ignore the 1099-R with code R when you get it in 2023. The box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.

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