How do I properly file Form 5329 for excess Roth IRA contributions I made back in 2022?

I'm in a bit of a jam and hoping someone can help me out. Back in 2022, I put $6k into my Roth IRA. I was making decent money that year with my new job and bonus, but I didn't realize there was an income limit for Roth IRA contributions. Now I'm learning that I wasn't eligible to contribute at all that year due to my income. I totally missed this when filing my 2022 taxes (already submitted those ages ago). From what I understand, those excess contributions and any earnings are subject to a 6% penalty tax each year until I fix it. Yikes. I'm working on my 2023 taxes now and trying to correct this mistake. I'm using FreeTaxUSA and see that I need to file Form 5329 to report these excess contributions. But when I got to that section on the website and looked at the actual IRS form, it seems incomplete or I'm missing something... Can someone walk me through how to properly file Form 5329 for this situation? Do I need to go back and amend my 2022 return as well? And what about the earnings on that $6k - how do I calculate and report those? This is my first time dealing with this issue and I'm pretty confused.

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18 comments

Emily Jackson

•8M

You're in a common situation, and it can definitely be fixed! You have a few options to handle the excess Roth IRA contribution: First, you'll need to file Form 5329 for both 2022 and 2023. For 2022, you'll report the $6,000 excess contribution on Line 20 of Part IV of Form 5329, and calculate the 6% excise tax on Line 25. This means you'll need to amend your 2022 return using Form 1040-X and include the completed Form 5329. For 2023, you have options: 1) Remove the excess contribution plus earnings, or 2) Recharacterize the contribution as a Traditional IRA contribution (if eligible). If you remove the excess, you'll report the withdrawal on your 2023 Form 5329. The earnings portion would be reported as income on your 2023 tax return. Your IRA custodian can help calculate the exact earnings amount attributable to the excess contribution. They'll also provide a Form 1099-R for the withdrawal.

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Emily Jackson

•8M

You're asking great questions. If the excess contribution is removed now in 2024, they would still owe the 6% penalty for both 2022 and 2023 since the excess amount remained in the account during those years. The removal in 2024 would prevent the penalty from applying to the 2024 tax year. For reporting, they would need to file an amended return (Form 1040-X) for 2022 with a completed Form 5329 showing the excess contribution and calculating the 6% tax. Then on their 2023 return, they would need to file another Form 5329 showing the same excess amount and calculating another 6% tax. The removal in 2024 would be reported on their 2024 taxes.

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Sophia Nguyen

•8M

I went through this exact situation last year and found that https://taxr.ai was super helpful for resolving it! I also had excess contributions to my Roth IRA because I didn't realize my promotion pushed me over the income limit. Their document analysis tool helped me understand exactly what I needed to do with Form 5329. I uploaded my previous tax return and the tool identified that I needed to file Form 5329 for both years and helped me understand how to calculate the earnings on my excess contributions. What was most helpful was that it explained how to properly report everything on both my amended return and current year return.

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Sophia Nguyen

•8M

The tool functions as both a guidance system and a document assistant. It analyzes your tax documents and provides specific instructions tailored to your situation. For a Traditional IRA conversion issue, it would identify the specific forms needed and explain how to complete each section correctly. Yes, it definitely helped with the earnings calculation. It provided a formula based on IRS guidelines and even showed me which performance metrics to use from my statements. I was able to take that information to my custodian with confidence, and they finally provided the correct numbers. It saved me from making some costly mistakes on both the calculation and the reporting.

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Isabella Brown

•8M

I wanted to follow up about my experience with taxr.ai since I was skeptical at first. After our conversation, I decided to give it a try with my excess contribution problem. I'm honestly impressed! The tool analyzed my previous return and immediately identified that I needed both Form 5329 and Form 8606 in my situation. It walked me through the earnings calculation step-by-step and even generated a letter template I could send to my custodian requesting the specific information needed. The custodian finally provided the correct earnings amount, and the tool helped me understand exactly where to report everything. Just filed my amended return yesterday and feel confident it's done right. Definitely worth checking out if you're dealing with any IRA complications!

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Maya Patel

•8M

If you're still struggling with the IRS about your excess Roth IRA contributions, I highly recommend using Claimyr (https://claimyr.com) to get through to an actual IRS agent. I spent weeks trying to get clarification on how to handle my own excess contribution situation, especially since I had already filed for 2022. After countless failed attempts calling the IRS directly, I tried Claimyr and was connected to an IRS representative in about 20 minutes. They have this cool demo video of how it works: https://youtu.be/_kiP6q8DX5c. The agent walked me through exactly how to complete Form 5329 for both tax years and confirmed I needed to file an amended return for 2022.

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Maya Patel

•8M

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Emma Garcia

•8M

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it as a last resort for my IRA excess contribution issue. I was shocked when I actually got a call back with an IRS agent on the line about 35 minutes later. The agent confirmed I needed to file Form 5329 for both years and explained exactly how to calculate the earnings portion (which my custodian had been giving me the runaround on). She even explained how the "removal of excess contributions" process works with the timing requirements. I was able to complete my amended return for 2022 and my current year return with the correct forms and calculations. Saved me from continuing to pay that 6% penalty indefinitely! Sometimes it's worth admitting when you're wrong - this service actually delivered.

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Ava Kim

•8M

You're absolutely right about the recharacterization deadline. The deadline is the tax filing deadline including extensions for the year the contribution was made. For 2022 contributions, that would have been October 16, 2023 (if an extension was filed). Since that deadline has passed for 2022 contributions, recharacterization is no longer an option in this case. At this point, the only options are to remove the excess contribution (plus earnings) or apply it to a future year if eligible. This is why catching these issues early is so important - it provides more flexibility in how to correct them.

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