Reporting earnings on excess ROTH contributions for 5 years

Forum|Forum|4 years ago
July 27, 2021
1 reply
16 views

Client has excess ROTH contributions for 2016-2019. Excess contributions are being withdrawn in July 2021.I have completed the 5329 for each year including 2020.

If the client withdraws all the earnings in order to close account, client is subject to 10% penalty since client is under age 59 1/2. My question is do I report all earnings on 2021 tax return when we receive the 1099-R or does each year have to be amended for earnings in that year?

ProSeries Professional

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Best answer by George4Tacks

Thank you for your reply. Yes I have researched this topic. My only outstanding question is to report the earnings withdrawn on the current year or amend each year?

Report earnings received in the year they are received.

qbteachmt

Level 15

See if this article helps, since it has a lot of info:

https://ttlc.intuit.com/community/retirement/discussion/multiple-years-of-roth-ira-excess-contribution-how-to-report/01/1647405

Don't yell at us; we're volunteers

C

csanchezAuthor

Level 5

This link was very helpful - thank you.

If client wants to withdraw all earnings & close the account, will prior year earnings be taxable if 5329 has been filed for those years & excess contributions have been withdrawn? Just still not clear if earnings are taxable & if so in year received or earned?

qbteachmt

Level 15

Earnings on Excess Roth will be taxable as ordinary income; there also is the 10% penalty for early withdrawal if they are under 59 1/2. They are taxable because there is no basis in these amounts.

Don't yell at us; we're volunteers

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