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

You're dealing with excess contributions to Roth IRAs, which can definitely be confusing! Let me help clarify things for you. For excess contributions to a Roth IRA, you need to file Form 5329 for the tax year in which the contribution was made. So for your 2023 contributions that exceeded the limit, you need to file a 2023 Form 5329 with your 2024 tax return (the one you're filing this year for the 2023 tax year). The 6% excess contribution penalty applies for each year the excess remains in the account. Since you've already withdrawn the excess contributions and earnings, you'll only owe this penalty for 2023. The withdrawal of earnings will be subject to income tax and potentially the 10% early distribution penalty, which will be reported on the 1099-R you'll receive for the 2024 tax year (that you'll file in 2025). Most tax software can generate the proper Form 5329 for you, but sometimes you need to manually indicate which tax year the form should apply to. Check if TaxAct allows you to specify that you're completing the 2023 version of Form 5329, not the 2024 version.

I was in a similar situation last year and found https://taxr.ai incredibly helpful for figuring out how to handle my excess Roth contributions. I used TurboTax initially, but it kept giving me weird calculations for my penalties. I uploaded my tax forms and IRA statements to taxr.ai and it immediately identified that I was filling out the wrong year's 5329 form. It walks you through exactly which forms to complete and in what order. For the 6% penalty, I learned that timing is everything - I had to pay it because I missed the tax deadline for correcting the prior year's contribution without penalty. The site explained that I needed to file the 2023 Form 5329 with my 2023 return (filed in 2024) for the excess contributions made for tax year 2023. Then I'll deal with the distribution penalties when I file next year.

Just wanted to update that I tried https://taxr.ai after seeing it mentioned here, and it was exactly what I needed! I uploaded my tax forms and IRA statements, and it immediately identified that I was using the wrong year's 5329 form. Their system walked me through the process step by step, explaining that for 2023 contributions, I needed to file the 2023 version of Form 5329 with my 2023 return (which I'm filing now in 2024). The tool created a properly filled out 5329 form that I could print and mail in, plus it gave me instructions on where to get the correct form if I wanted to fill it out myself. It saved me from paying my CPA that extra $200! It also clearly explained that I'll deal with the early distribution penalties next year when I file my 2024 return. The guidance was clear and straightforward, unlike the confusing explanations I was getting elsewhere.

I had a nightmare trying to reach the IRS about an excess contribution penalty last year. Spent HOURS on hold and never got through. Finally discovered https://claimyr.com through a tax forum and used their service to get a callback from the IRS within 2 hours! You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that for excess Roth contributions made in 2023, you need to file the 2023 Form 5329 with your 2023 tax return (which you're filing now in 2024). This is separate from any 2024 Form 5329 you might need for other issues. She also confirmed that the earnings portion of your withdrawal will be taxable in 2024 (reported on next year's return) and subject to the 10% early distribution penalty unless you qualify for an exception. Getting actual confirmation from the IRS gave me peace of mind and saved me from potentially making costly mistakes.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it for myself because I also had a question about excess IRA contributions that I couldn't resolve through the IRS website. The service worked exactly as promised - I submitted my request, and within about 90 minutes I got a call connecting me directly to an IRS representative. No waiting on hold, no navigating confusing menu systems. The agent was able to confirm that I needed to file Form 5329 for the year the contribution was made (not the year I discovered the error), and that the 6% excise tax applies for each year the excess remains in the account. She also walked me through exactly how to report the subsequent withdrawal of earnings in the following tax year. I've been filing my own taxes for 15 years and have wasted countless hours on hold with the IRS - this service would have saved me so much frustration over the years. Definitely keeping this in my toolkit for future tax questions!

Don't make the same mistake I did! I had excess Roth contributions in 2022 but didn't realize it until 2023. I thought I could just withdraw the money and be fine, but I still had to pay the 6% penalty because the excess was in there past the tax deadline. The key is understanding that Form 5329 needs to be filed for the tax year of the contribution - so your 2023 contributions need a 2023 Form 5329, even though you're filing it with your 2023 return in 2024. And yes, next year you'll report the distribution of earnings on your 2024 return when you file in 2025, using the 1099-R your brokerage will send you. If your tax software isn't handling this correctly, you might need to print and mail that specific form separately.

Does anyone know if I can e-file a return with a Form 5329 for a previous tax year? Or do I have to print and mail it?

Just a heads up - make sure you're calculating the penalty on the EXACT amount of the excess contribution, not including earnings. I made that mistake and overpaid my penalty. For example, if you contributed $6,000 but were only eligible to contribute $4,000, your excess is $2,000 and the 6% penalty would be $120. The earnings don't factor into the penalty calculation, though they do get taxed when withdrawn.

This is a really helpful thread! I'm dealing with a similar situation but with a twist - I made excess contributions to both traditional AND Roth IRAs for 2023. Do I need to file separate Form 5329s for each type of account, or can I report both on the same form? Also, I'm seeing conflicting information about whether I can recharacterize the traditional IRA excess contribution to a Roth IRA to avoid the penalty, or if that would just create another excess contribution issue since my income was too high for direct Roth contributions anyway. Has anyone dealt with this double excess contribution scenario before? My tax software (H&R Block) is giving me error messages when I try to enter both types of excess contributions, so I'm wondering if I need to handle this manually or switch to different software.

This thread has been incredibly helpful! I'm dealing with a similar situation but wanted to clarify something about the timing. You mentioned withdrawing the excess contributions "as of a few days ago" - the key deadline here is the tax filing deadline for the year the contribution was made (including extensions). For 2023 contributions, that deadline was October 15, 2024 (with extension). If you withdrew after this date, you'll still owe the 6% penalty for 2023 even though you removed the excess. The penalty applies because the excess was still in the account on December 31, 2023. Regarding TaxAct showing this on your 2024 Form 5329 - that's incorrect. You need the 2023 Form 5329 to report excess contributions made for tax year 2023. Most tax software struggles with this cross-year reporting. You may need to manually prepare and mail the 2023 Form 5329 separately from your main return. And yes, you're correct about the timing for the earnings tax - you'll report that on your 2024 return next year when you receive the 1099-R from Fidelity. The 10% early withdrawal penalty will apply to just the earnings portion, not the original contribution amount.