How to fill out Form 5329 for excess Roth IRA contribution and when to pay penalties?

Thanks for the explanation! I'm still a bit confused though. If I already took out the excess contributions in 2024, do I still need to pay the 6% penalty for 2023? Or does removing them eliminate that penalty? And will TaxAct automatically calculate the 10% early withdrawal penalty or do I need to do something separate for that?

If you withdrew the excess contributions and associated earnings before your tax filing deadline (including extensions) for 2023, then you can avoid the 6% penalty. However, since you said you just withdrew them "as of yesterday," if that was after the tax filing deadline (April 18, 2024 for most people), then yes, you would still owe the 6% penalty for 2023 because the excess was still in the account as of December 31, 2023. Regarding the 10% early withdrawal penalty on earnings - you don't need to worry about that until next year. When you file your 2024 taxes (in 2025), you'll receive a 1099-R from your financial institution showing the withdrawal. At that point, your tax software will calculate the appropriate tax and penalties on those earnings.

Did taxr.ai help you figure out how to actually file the correct year's 5329? My CPA is charging me an extra $200 just to handle this one form because she says it's "complicated" and I feel like I'm being ripped off.

I'm curious - does taxr.ai handle state tax implications too? I'm in California and they treat some of this IRA stuff differently than federal.

It guided me through completing the 5329 for the correct year and even produced a filled-out PDF that I could print and mail in. The tool showed me exactly which lines to complete and what numbers to use. No extra charges like what your CPA is trying to pull. Yes, it handles state-specific issues too! I'm in New York, and it flagged that NY has some different treatments for retirement account penalties. It showed me the differences between federal and state handling of the excess contribution penalties and provided state-specific guidance.

Wait, how does Claimyr actually work? Does it somehow jump you ahead in the IRS phone queue? That seems too good to be true.

I'm skeptical... I've tried those "get to a human" services before and they never worked. The IRS phone system is designed to be impenetrable. How much did this cost you and was it really worth it?

It doesn't jump you ahead in the queue - it basically automates the hold process for you. Their system navigates the IRS phone tree and waits on hold so you don't have to. When they reach a human agent, you get a call connecting you directly to that agent. It's like having someone wait in line for you. I was skeptical too, but after being on hold for 2+ hours myself multiple times with no success, I was desperate. The service worked exactly as advertised - I got a call back with an IRS agent on the line ready to help with my specific question about Form 5329. Totally worth it for the time saved and stress reduction. Can't put a price on finally getting a definitive answer straight from the IRS.

Quick question - if I withdrew excess contributions before the filing deadline (including extensions), do I still need to file Form 5329 at all? Or can I just skip it completely?

If you withdraw the excess contributions plus earnings before your filing deadline (including extensions), you don't have to pay the 6% penalty or file Form 5329 for that specific issue. You've essentially "undone" the excess contribution. However, you'll still need to report the earnings portion of what you withdrew on your tax return for the year you take the distribution. Those earnings are subject to regular income tax and potentially the 10% early withdrawal penalty if you're under 59½.

Most tax software can include Form 5329 with your e-filed return, but the tricky part is making sure it's for the correct tax year. When I had to file one for a previous year, TaxAct let me e-file it with my current return, but TurboTax made me print and mail it separately. Might depend on which software you're using.

Thanks for the info! I'm using FreeTaxUSA this year so I'll check if they allow e-filing with the previous year's Form 5329 included.

This is really helpful clarification about the timing! I had no idea about the October 15th deadline with extensions. So just to make sure I understand correctly - if someone made excess 2023 contributions and withdrew them in, say, November 2024, they'd still owe the 6% penalty for 2023 because the money was still in the account on December 31, 2023, even though they eventually fixed it? Also, when you say "manually prepare and mail the 2023 Form 5329 separately," do you mean I should get the actual 2023 version of the form from the IRS website and fill it out by hand, or can I still use tax software to generate it as long as I specify it's for 2023? I'm nervous about making calculation errors if I have to do it completely manually.

Yes, you've got it exactly right! The penalty applies based on whether the excess was in the account on December 31st of the tax year, regardless of when you eventually remove it. So excess 2023 contributions withdrawn in November 2024 would still trigger the 6% penalty for 2023. For the Form 5329, you have a couple options. You can download the actual 2023 version from the IRS website (make sure you get the 2023 form, not 2024) and fill it out manually, but you're right to be concerned about calculation errors. A better approach might be to use tax software that can generate the correct year's form. Some software allows you to specify which tax year the form applies to. You could also try the tools mentioned earlier in this thread - several people had success with taxr.ai for generating properly filled-out forms for the correct tax year. The key is making absolutely sure the form says "2023" at the top and that you're using the 2023 instructions, since the IRS sometimes makes changes to forms between years. Double-check all your calculations against the 2023 Form 5329 instructions before mailing it in.

Yes, you've got it exactly right! The 6% penalty is based on whether the excess contribution was in the account on December 31st of the tax year it was made for. So even if you withdraw the excess in November 2024, you'd still owe the penalty for 2023 because the money was there on December 31, 2023. For preparing the 2023 Form 5329, you have a few options. You can download the actual 2023 version from the IRS website (make sure you get the 2023 form, not 2024) and fill it out manually. But if you're worried about calculation errors, some tax software will let you generate previous year forms - you just need to specify you're working on a 2023 form. The calculations are actually pretty straightforward for the excess contribution penalty - it's just 6% of the excess amount. So if you had $1,000 excess, the penalty would be $60. The tricky part is making sure you use the right year's form and attach it properly to your return. If your main tax software won't handle it, you could also try using the IRS Free File Fillable Forms for the 2023 Form 5329 - they have previous year forms available and will do the math for you.

Yes, you've got it exactly right! If you made excess 2023 contributions and withdrew them after October 15, 2024, you'd still owe the 6% penalty for 2023 because the IRS looks at whether the excess was in the account on December 31, 2023. The withdrawal after the deadline removes the excess going forward, but doesn't erase the fact that it was there during 2023. For preparing the 2023 Form 5329, you have a few options. You can download the actual 2023 version from the IRS website (make sure you get the right year!) and fill it out manually, but I understand the concern about calculation errors. Some tax software will let you generate a 2023 Form 5329 if you can specify the tax year - you'd need to check if your software has this capability. Another option that several people mentioned earlier in this thread is using tools like taxr.ai which can help generate the correct form with the right calculations. The key is making sure whatever method you use produces a 2023 Form 5329, not a 2024 one. Double-check that the form header shows "2023" and that you're using the contribution limits and penalty rates that applied for 2023.

Yes, exactly! You understand it correctly - the 6% penalty applies based on whether the excess was in the account on December 31st of the contribution year, regardless of when you eventually remove it. So excess 2023 contributions removed in November 2024 would still trigger the penalty for 2023. For the Form 5329, you have a couple options. You can download the actual 2023 Form 5329 PDF from the IRS website and fill it out manually, but you're right to be concerned about calculation errors. A safer approach is to use tax software that allows you to specify the tax year for the form. Some programs like FreeTaxUSA or TaxAct let you generate forms for previous years - you just need to make sure you're creating a 2023 Form 5329, not a 2024 one. If your current software won't cooperate, you could also use one of the tools mentioned earlier in this thread like taxr.ai to generate the correct form with the right calculations. The key is making sure the form header says "2023" and that you're using the 2023 version of the instructions, since the IRS sometimes makes small changes year to year.

Yes, that's exactly right! The 6% penalty applies for each year the excess contribution remains in the account. So if you made excess 2023 contributions and they were still in the account on December 31, 2023, you owe the penalty for 2023 - even if you withdraw them later in 2024. It's based on the account balance at year-end, not when you eventually fix the problem. For preparing the 2023 Form 5329, you have a few options. You can download the actual 2023 version from the IRS website (make sure you get the right year's form) and fill it out manually, but you're right to be concerned about calculation errors. Some tax software allows you to prepare forms for previous years - you might be able to create a separate 2023 tax file in TaxAct just to generate the Form 5329, then print and mail it. Another option is to use one of the specialized tax tools that other people mentioned earlier in this thread, like taxr.ai, which can help ensure you're using the correct form year and making accurate calculations. The key is making sure whatever method you use generates the 2023 version of Form 5329, not the 2024 version.

Exactly right! If you withdrew the excess contributions after the October 15th deadline (including extensions), you'd still owe the 6% penalty for 2023 because the IRS looks at whether the excess was in the account on December 31st of the contribution year. The penalty applies for each year the excess remains, so removing it later doesn't retroactively eliminate the penalty for 2023. For preparing the 2023 Form 5329, you have a couple options. You can download the actual 2023 version from the IRS website (irs.gov) and fill it out manually, but I'd recommend trying your tax software first. Most programs allow you to specify which tax year a form is for - look for an option to "add forms from prior years" or "amend/file forms for different tax years." TaxAct should have this capability. If your software won't cooperate, you can also use the IRS's fillable forms on their website, which do the basic calculations for you and reduce the risk of math errors. Just make sure you're using the 2023 version of Form 5329, not 2024. The form needs to be mailed separately with a cover letter identifying it as a form for your 2023 tax year.

Yes, you've got it exactly right! If the excess contributions were still in the account on December 31, 2023, you owe the 6% penalty for 2023, regardless of when you eventually withdrew them. The penalty is based on the account balance as of the end of the tax year, not when you fix the problem. For the Form 5329, you have a few options. You can download the actual 2023 version from the IRS website (irs.gov) and fill it out manually, but I'd recommend using tax software if possible to avoid calculation errors. Some tax software lets you specify which tax year you're preparing forms for - check if TaxAct has an option to prepare "prior year" forms or amendments. Alternatively, you could try the tax tools some folks mentioned earlier in this thread like taxr.ai, which seemed to help others generate the correct year's Form 5329 automatically. The key is making sure whatever method you use, it's specifically the 2023 version of Form 5329, not the 2024 version, since that's the tax year when the excess contribution was made. If you do end up filling it out manually, the IRS instructions for Form 5329 are pretty detailed and walk you through the calculations step by step. Just make sure you're using the 2023 contribution limits and penalty rates.

Exactly right on the timing! If you withdrew in November 2024, you'd still owe the 6% penalty for 2023 because the excess was in the account for the entire 2023 tax year. The penalty is assessed for each year the excess remains, regardless of when you eventually remove it. For the Form 5329, you have a couple options. You can download the actual 2023 version from the IRS website (make sure you get the 2023 form, not the current year) and fill it out manually, or some tax software will let you generate a 2023 Form 5329 if you can specify the tax year. The calculations are pretty straightforward - it's just 6% of the excess contribution amount. If you're worried about errors, you might want to try one of the tax tools mentioned earlier in this thread like taxr.ai that others said helped them with the correct year's form and calculations. Having the right numbers is crucial since you'll be mailing this separately from your main e-filed return.

Exactly right on the timing! If you withdrew the excess contributions after October 15, 2024 (the extended deadline for 2023 returns), you'd still owe the 6% penalty for 2023 because the IRS looks at whether the excess was in the account on December 31, 2023. The penalty is assessed for each year the excess remains, regardless of when you eventually remove it. For preparing the 2023 Form 5329, you have a few options. You can download the actual 2023 version from the IRS website (make sure you get the 2023 form, not 2024) and fill it out manually - the calculations are actually pretty straightforward. The excess contribution amount goes on line 1, and the 6% penalty is calculated on line 2 (just multiply by 0.06). Alternatively, some tax software will let you generate a standalone Form 5329 for a prior year if you start a separate "amended return" process or look for options to file forms for previous years. Just make sure it's clearly marked as a 2023 form. You'd then print and mail this separately with a cover letter explaining it's for your 2023 excess contributions. The key is making sure the form year matches the contribution year - that's where most people (and software) get tripped up.

Yes, you've got it exactly right! If the excess contributions were still in the account on December 31st of the tax year they were made for, you owe the 6% penalty for that year, regardless of when you eventually remove them. So excess 2023 contributions withdrawn in November 2024 would still trigger the 2023 penalty because they were present on December 31, 2023. For the Form 5329, you don't have to fill it out completely by hand - that would definitely increase the risk of errors! You can still use tax software to help generate the form, but you'll need to specify that you're preparing the 2023 version. Some software handles this better than others. Alternatively, you can download the 2023 Form 5329 directly from the IRS website (make sure you get the 2023 version, not 2024) and use a PDF editor to fill it out electronically before printing. The form includes line-by-line instructions that walk you through the calculations. The math is actually pretty straightforward - it's mainly just multiplying your excess contribution amount by 6% (.06). If you're still unsure about the calculations, the tax preparation tools mentioned earlier in this thread like taxr.ai can help generate the correct form with the right calculations, which might give you more confidence than doing it completely manually.

Yes, you've got it exactly right! If someone made excess 2023 contributions and withdrew them after October 15, 2024, they'd still owe the 6% penalty for 2023 because the IRS looks at whether the excess was in the account on December 31, 2023. The penalty applies for each year the excess remains, regardless of when you eventually fix it. For the Form 5329, you have a few options. You can download the actual 2023 version from the IRS website and fill it out manually, but that's definitely error-prone. A better approach is to use tax software that can generate the correct year's form - some software lets you specify which tax year the form applies to. The tools mentioned earlier in this thread like taxr.ai can be helpful for this exact situation since they specialize in handling these cross-year IRA issues. If your main tax software (like TaxAct) is insisting on using the 2024 form, you might need to prepare the 2023 Form 5329 separately and mail it in. Just make sure whatever method you use, the form header clearly shows "2023" as the tax year, not 2024.

Exactly right on the timing! If you withdrew excess 2023 contributions in November 2024, you'd still owe the 6% penalty for 2023 because the excess was in the account past the deadline. The penalty is assessed based on whether the excess was still there on December 31st of the contribution year, regardless of when you eventually fix it. For the Form 5329, you have a few options. You can download the actual 2023 version of Form 5329 from the IRS website (make sure it says "2023" at the top) and fill it out manually - the calculations are actually pretty straightforward. Just multiply your excess contribution amount by 6% (.06). Alternatively, some tax software lets you generate forms for previous years if you specify the tax year correctly. The key is making sure whatever method you use produces a form that clearly shows "2023" as the tax year. Don't rely on software that's automatically generating a 2024 form for 2023 contributions - that's exactly the error the original poster was trying to avoid. If you're nervous about manual calculations, the tools mentioned earlier in this thread like taxr.ai might be helpful for generating the correct form with proper calculations.

Exactly right on the timing! The 6% penalty applies for each year the excess remains in the account as of December 31st of that year. So if you made excess 2023 contributions and they were still there on December 31, 2023, you owe the penalty for 2023 - even if you withdraw them months later in 2024. For the form preparation, you have a few options. You can download the actual 2023 Form 5329 from the IRS website (irs.gov) and fill it out manually, but you're right to be concerned about calculation errors. A better approach might be to use tax software that can generate the 2023 form correctly - some of the tools mentioned earlier in this thread like TaxR.ai are specifically designed to handle these cross-year IRA issues and can produce properly filled PDFs. You could also try using your current tax software but carefully check that it's generating the 2023 version of Form 5329, not the 2024 version. The form number should clearly indicate "2023" and the tax year should match. If your software keeps defaulting to 2024, then yes, you'll need to handle it separately. The key calculations are pretty straightforward though - it's 6% of the excess contribution amount (not including any earnings), so if you had a $1,000 excess contribution, the penalty would be $60.

Yes, you've got it exactly right! If the excess contributions were still in the account on December 31, 2023, you owe the 6% penalty for 2023 regardless of when you eventually withdrew them. The penalty is based on the account balance at year-end, not when you correct the issue. For preparing the 2023 Form 5329, you have a couple options. You can download the actual 2023 version of Form 5329 from the IRS website (irs.gov) and fill it out manually, but you're right to be concerned about calculation errors. A safer approach is to use tax software that allows you to specify which tax year the form is for. Some software like FreeTaxUSA and TaxAct can generate prior year forms - you just need to make sure you're selecting "2023" when creating the Form 5329. If your current software won't cooperate, you could also use the IRS Free File Fillable Forms for 2023, which lets you complete the form electronically with built-in calculations to avoid math errors. Just make sure whatever method you use, you're filing the 2023 version of the form, not 2024, since the excess contributions were made for tax year 2023.

Exactly right on the timing! If you withdrew excess 2023 contributions in November 2024, you'd still owe the 6% penalty because the excess was in the account on December 31, 2023. The penalty is assessed based on whether the excess was present at year-end, not when you eventually correct it. For preparing the 2023 Form 5329, you have a few options. You can download the actual 2023 version from the IRS website (make sure to get Form 5329 for tax year 2023, not 2024) and fill it out manually. However, if you're worried about calculation errors, some tax software will let you generate a 2023 Form 5329 if you can specify the tax year - you might need to look for an "additional forms" or "prior year forms" section in your software. The calculations are actually pretty straightforward: Line 4 would be your excess contribution amount ($6,000 in the original poster's case), and Line 5 would be 6% of that amount ($360 total, or $60 per person if splitting). Just make sure you're using the 2023 form and not accidentally filing a 2024 form with 2023 data.

Yes, that's exactly right! The 6% penalty is assessed based on whether the excess contribution was still in the account at the end of the tax year it was made for. So excess 2023 contributions that remained in the account on December 31, 2023 are subject to the penalty, even if withdrawn later. For the Form 5329, you have a few options. You can download the actual 2023 version of Form 5329 from the IRS website and fill it out manually, but you're right to be concerned about calculation errors. A better approach might be to see if your tax software has an option to prepare forms for prior years - some do allow this. Alternatively, you could use one of the tax tools mentioned earlier in this thread like taxr.ai that specifically handle these cross-year IRA issues. They can generate the properly filled-out 2023 Form 5329 with the correct calculations, which you can then print and mail separately from your main 2024 return. The key is making sure you're using the 2023 version of the form, not the 2024 version, since the form fields and instructions can change between years. The penalty calculation itself is straightforward (6% of the excess amount), but getting it on the right year's form is crucial.

Exactly right on the timing! Even if you withdraw the excess contributions later, the 6% penalty still applies for any year the excess remained in the account as of December 31st. So November 2024 withdrawal of 2023 excess contributions = you still owe the penalty for 2023. For preparing the form, you have a few options. You can download the actual 2023 Form 5329 from the IRS website and fill it out manually, but you're right to be concerned about calculation errors. A better approach might be to use tax software that can generate the 2023 version - some software allows you to specify which tax year you're preparing forms for. You could also try the tools mentioned earlier in this thread like taxr.ai that specifically help with these cross-year IRA issues. They can generate properly filled forms and walk you through the calculations to avoid errors. The key thing is making sure you're using the 2023 version of Form 5329 (not 2024) and that all your calculations are based on the excess contribution amounts, not including any earnings. The IRS is pretty strict about these forms being completed correctly, so taking extra care with the preparation is worth it.

Yes, you've got it exactly right! If you made excess 2023 contributions and withdrew them after October 15, 2024 (the extended deadline), you'd still owe the 6% penalty for 2023 because the IRS looks at whether the excess was in the account on December 31, 2023. The penalty applies for each year the excess remains, regardless of when you eventually fix it. For the Form 5329, you have a few options. You can download the actual 2023 version from the IRS website (make sure it says "2023" at the top) and fill it out manually, but I understand your concern about calculation errors. Some tax software will let you generate previous year forms - you'd need to check if your software has an option to prepare "prior year" or "amended" returns. Another option that several people mentioned earlier in this thread is using specialized tax tools that can handle these cross-year situations and generate the properly filled forms for you. That might give you the accuracy of software calculations while ensuring you're using the correct year's form. The key is making sure the form clearly indicates it's for tax year 2023, not 2024, since that's when the excess contribution was made.