Excess ROTH withdrawal

[rtsietsema]

Client and spouse have made ROTH IRA contributions in 2022 and 2023. Unfortunately their income is too high for both years.

We are in the process of getting the 2023 funds withdrawn before filing, and I realize there is no penalty involved if they do. But I lack experience in how to report the earnings they will need to withdraw as well. My understanding is they get reported on their 2023 return, but where? I won’t have a 1099R issued on the withdrawal so where/how do I enter the earnings? I also believe there will be a 10% penalty, under 59 1/2 age, as well as ordinary taxable income?

If someone could help on the 2022 withdrawal after it’s done. Do I need to file form 5329 from 2022 to assess the 6% excise tax, and it’s only assessed for one year? Then do I need to amend the 2022 return to handle the earnings when I receive a 1099R on that transaction?

Thanks so much for any assistance in an area I have limited experience.

[kathyc2]

The brokerage company will calculate the earnings. The earnings will be reported on 2024 as the taxable portion of 1099R that will be issued. The earning will be taxable but no penalty.

The 6% tax applies for each year the money remains in account. For the 2022 contributions you can file the 5329 as a stand alone form without amending. Since the 2022 contribution was still in account the 6% also needs to be on 2023 5329 which can be filed as part of return.