Retirement Savings and Benefits
Questions and comments about IRAs, 401k accounts, social security, and other forms of retirement savings and benefits.
Roth IRA Excess 2015
Posted by: banff50, April 8, 2017 05:46PM
I just realized I have an excess contribution of $600 for the 2015 tax year.

Should I amend 2015 tax return and add a explanatory note?

And I'm also stuck with the excise tax for 2016 right?

Also, I have already contributed the max to Roth IRA for 2017 so I'm going to have to determine the best way to correct this excess.

Re: Roth IRA Excess 2015
Posted by: Alan S., April 8, 2017 06:16PM
Did you max out your Roth for 2016? If so, does your 2016 Roth contribution have a gain?

Yes, you do owe the 6% excise tax at least for 2015 on a 2015 Form 5329. 2016 depends on what can be done with your 2016 situation.

Re: Roth IRA Excess 2015
Posted by: banff50, April 9, 2017 04:40AM
Yes, I maxed Roth IRA for 2016 and already maxed it for 2017 as well.

I'm not sure if gain or loss, haven't looked closely at it yet.

Re: Roth IRA Excess 2015
Posted by: Alan S., April 9, 2017 03:19PM
Best option would be to simply request a distribution of exactly $600 anytime before the end of this year. Do not mention anything about excess contributions to the custodian. This distribution is after the extended due date for 2015, so no earnings calculation is done.

That distribution will be tax free since it comes from your regular contribution balance, but you will need to report it on Form 8606 for 2017. That will end the excess contribution excise taxes.

You will have to file a 5329 for 2015 as indicated above and can send it in with or without a 1040X, and also for 2016. The 2016 5329 goes on your 2016 return if you have not yet filed. Finally, you will have to file a 2017 5329 which will show your distribution which erases the excess contribution carried over to 2017. There is no excise tax for 2017.

The total cost will therefore be $36 for 2015 and also for 2016. The IRS may or may not send a bill for late interest on the 2015 5329.

Re: Roth IRA Excess 2015
Posted by: banff50, September 27, 2017 04:43AM
Do I have until end of Dec this year to perform the distribution?

For the Form 5329, would that be filed with my tax return that is due on 4/15/2018 or should it be filed separately this year?

Re: Roth IRA Excess 2015
Posted by: Alan S., September 27, 2017 04:57PM
Yes, you have until the end of December, and the 5329 can be filed with your 2017 return. You also need an 8606 to report the distribution even though it will be non taxable because it comes out of your regular Roth contribution basis.

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