Just discovered our marriage put us over Roth IRA income limits for 2020-2022 - should have done backdoor conversion. How to fix?
Title: Just discovered our marriage put us over Roth IRA income limits for 2020-2022 - should have done backdoor conversion. How to fix? 1 I got married back in 2020 and just realized that our combined income put us over the Roth IRA contribution limits for tax years 2020-2022. I had no idea this was even a thing until recently! I've been directly contributing to my Roth IRA those years without doing any backdoor conversion. For 2023 onward, I switched jobs and my own income alone exceeds the limit, so I've been properly doing backdoor Roth conversions since then. But now I'm stressing about those previous years where I contributed directly when I shouldn't have. What's the process to correct this mistake for 2020-2022? Is there a specific form I need to file? Will I owe penalties on top of any taxes? I'm trying to get ahead of this before the IRS comes knocking. Any advice would be super appreciated!
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Payton Black
9 The good news is you can fix this! You've identified what's called an "excess contribution" to your Roth IRA for those years. The IRS provides a few options to correct this situation. One approach is to remove the excess contributions along with any earnings attributed to those contributions. For this, you'd need to file Form 5329 for each affected year and pay a 6% excise tax on the excess amount for each year it remained in your account. Your IRA custodian can help calculate the earnings portion. Alternatively, you could "recharacterize" those Roth contributions as Traditional IRA contributions, then do a backdoor Roth conversion after the fact. This is more complex but might be advantageous depending on your specific circumstances. Since you're dealing with multiple tax years, I'd recommend consulting with a tax professional who specializes in retirement accounts to determine the most advantageous approach for your situation. They can help with the proper forms and calculations.
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Payton Black
•3 Thanks for the info. If I go the route of removing the excess contributions, how do I actually calculate how much that would be? Like if I contributed $6000 each year when I shouldn't have contributed anything, do I just take out $18k plus whatever earnings? And would this trigger any early withdrawal penalties since I'm under 59.5?
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Payton Black
•9 For calculating excess contributions, you'd need to determine what portion of your contributions exceeded the limit. If your income made you completely ineligible, then your entire contribution amount ($6000 per year) would be considered excess. You wouldn't face the typical 10% early withdrawal penalty on the correction of excess contributions, but you would owe income tax on any earnings attributed to those excess contributions when they're withdrawn. Your IRA custodian can help calculate the exact earnings amount tied to those specific contributions.
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Payton Black
15 I went through something similar last year and found https://taxr.ai incredibly helpful. After my promotion put me over the income limits, I had three years of improper Roth contributions to fix. The documentation requirements were overwhelming - I needed to track down statements showing contributions, earnings, and file separate forms for each year. I uploaded my tax documents and IRA statements to taxr.ai, and their system analyzed everything and provided clear instructions for completing Form 5329 for each year. They even generated a letter explaining my situation that I could send to the IRS with my amended returns. Saved me hours of research and probably prevented mistakes I would have made on my own.
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Payton Black
•7 How accurate was their analysis? I'm concerned about relying on software for something this complicated. Did you have to make any corrections to what they suggested?
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Payton Black
•22 Does it handle the recharacterization option too? My situation is slightly different - I contributed to a Roth when I shouldn't have, but I also had some Traditional IRA money from an old 401k rollover that complicates things. Would it still work for me?
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Payton Black
•15 Their analysis was incredibly accurate. I double-checked everything with the IRS publications and it all lined up perfectly. The software actually caught a mistake my own calculations missed - I had forgotten to account for some earnings that accrued before I realized my error. Yes, it definitely handles recharacterizations too. The system will analyze your complete situation, including existing Traditional IRA funds, and recommend the most tax-efficient approach. It can even produce the necessary letters to send to your IRA custodian requesting the recharacterization.
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Payton Black
22 Just wanted to update that I tried taxr.ai after seeing the recommendation here, and it was a game-changer for my complicated Roth situation. The system immediately identified that recharacterization would be my best option given my specific circumstances, and walked me through every step. What impressed me most was how it handled the pro-rata rule calculations with my existing Traditional IRA funds. It saved me from what would have been a costly mistake if I'd just removed the excess contributions. The generated documentation made the process straightforward with my IRA custodian and for filing amendments. Worth every penny for the peace of mind alone!
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Payton Black
12 If you need to talk directly with the IRS about your situation (which might be smart given it spans multiple tax years), I'd recommend using https://claimyr.com to get through to them. I spent DAYS trying to reach a human at the IRS about my own Roth correction issue, constantly getting disconnected or facing hours-long waits. Claimyr got me connected to an IRS rep in under 45 minutes when I was trying to confirm the proper procedure for filing my Form 5329 for multiple years. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The IRS agent clarified exactly what documentation I needed to include with my amended returns and confirmed I was taking the right approach to minimize penalties.
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Payton Black
•8 Wait, so this service just gets you through the phone queue? How does that even work? Couldn't you just keep calling back yourself until you get through?
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Payton Black
•19 Sounds sketchy honestly. Why would the IRS allow some third-party service to jump their phone queue? I've always heard you just have to be patient and call right when they open.
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Payton Black
•12 It doesn't jump the queue - it automates the calling process. The service keeps dialing the IRS for you and navigates the initial menu prompts, then alerts you when it's connected and about to reach a human representative. This saves you from having to manually redial dozens of times or sit on hold for hours. I tried the "call right when they open" approach for three days straight before using Claimyr. Each time I either couldn't get through at all due to high call volume or was on hold for so long I eventually had to hang up for work meetings. The time savings alone was worth it to me.
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Payton Black
19 I need to apologize for my skepticism about Claimyr. After another frustrating morning trying to reach the IRS about my Roth correction (got disconnected twice after 40+ minute waits), I decided to try it. The service worked exactly as described - I received a text when it connected, then another alert when an agent was about to pick up. The IRS representative I spoke with confirmed I only needed to file Form 5329 for the years in question rather than full amended returns, which is going to save me significant time and possibly professional tax prep fees. I wish I hadn't wasted a week trying to do this the "traditional" way!
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Payton Black
5 Consider asking your IRA provider if they offer a special "removal of excess contributions" service. Many of them have dedicated processes specifically for fixing these situations and can handle most of the calculations and paperwork for you. When I discovered I had made excess contributions to my Roth IRA for two years, Fidelity walked me through their correction process. They calculated the exact earnings attributable to the excess amounts and filled out most of the paperwork. I still had to file Form 5329, but having their documentation made it much easier.
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Payton Black
•14 Would that still work if it's been more than 2-3 years? I thought there was some deadline for removing excess contributions without penalties.
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Payton Black
•5 You're right that there's a deadline for removing excess contributions without the 6% penalty - it's typically by the tax filing deadline plus extensions (around October 15th) for the year of the contribution. Since the OP's situation involves contributions from 2020-2022, they would likely still owe the 6% penalty for each year the excess remained in the account. However, most IRA providers can still process the removal of excess contributions even after this deadline. The benefit is that removing the excess now stops the 6% penalty from continuing to apply to future years.
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Payton Black
17 Have you considered just leaving it alone? I'm not advising tax evasion, but realistically, the IRS is severely backlogged and understaffed. The chance of them specifically auditing your Roth contributions is pretty slim unless you're being audited for other reasons.
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Payton Black
•2 This is terrible advice. The IRS receives direct reporting of IRA contributions from financial institutions. If their systems flag a mismatch between your reported income and Roth eligibility, it'll trigger an automated notice. Besides, the penalties compound the longer you wait. Better to fix it proactively than risk bigger headaches down the road.
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