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URL:  https://boards.fool.com/while-preparing-2013-tax-return-i-have-discovered-31181425.aspx

Subject:  Re: Reporting earnings on excess Roth contributi Date:  3/25/2014  12:44 PM
Author:  TMFPMarti Number:  120570 of 132201

While preparing 2013 Tax Return I have discovered that I was not allowed to contribute to my Roth IRA in 2011 due to the AGI limitations. I did contribute $5,000 in 2011.

I understand that I have to file amended 2011 and 2012 returns both having form 5329 added and pay 6% excise tax on the excess amount (=5,000) for both years. I will also file 5329 for 2013, but since I caught it before April 15, 2014 it will be on the original return.


Here's what I understand happened:

2011: $5,000 Roth contribution; all excess
2012: You don't say what you did. We need to know
2013: Roth contribution; all excess

The only thing we can say for sure at this point is that you owe the excess contribution penalty of $300. You do not have to amend your 2011 1040. Just file the 5329 along with the $300.

<I?I am also planning to remove both principal (=5,000) and earnings in order to correct the excess contribution and avoid paying 6% excise tax in subsequent years. My broker (E-Trade) will not calculate earnings on contributions made during years prior to 2013, so I will have to do it myself -- I did find the IRS Worksheet in Pub 590 to calculate the earnings -- and I will do so.

Please don't. The only year you need earnings for is 2013.

Everything that I have read so far says that I need to report the earnings portion of the return as regular income as well as calculate 10% early withdrawal penalty on it (since I am younger than 59 and 1/2) for the year the excess contribution was made, NOT for the year it was removed.

You're very confused. Get back to us about 2012 and we'll finish.

Phil
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