Hi, I have kept the 5498s, as well as a copies of the documents I filled out along with an image of my paper checks, for all my ROTH IRA contributions in the past. Good thing I did! For just about every year, my practice was to contribute the max amount in one installment for the prior tax year.
So, during April 2001, I would have contributed for the 2000 tax year, during April 2002, for tax year 2001, etc etc.
I'm sorry to say that I found the culprit. In April 2004, when I filled out the application I neglected to check the box instructing the custodian to apply my $3,000 to the 2003 tax year. So this is totally my fault. I intend on calling the fund custodian to see what my options are for correcting this, but I have a feeling that I will have to pay a penalty to the IRS. I'm glad I caught this now, I'd hate to think what the total penalty would be if I never found this mistake. I'm sure it's a common occurrence, but it doesn't make me feel any better
This leads to one more question. I am assuming I will need to withdraw the excess amount, which is the $3,000 plus the earnings attributed to that principal. Plus, I would have to pay a 6% penalty for each of the years that those funds remained in the Roth. regarding the 6% penalty. Does that sound about right?
Or, could I ask them to re characterize the $3,000 in the Roth as a Traditional IRA, and avoid paying penalties altogether?
One more thing, why didn't the IRS catch this, as they were furnished with the 5498s by the plan providers?
Thanks so much for your reply!
If you don't contribute completely one year, the excess contribution "works itself out" until it goes away.
My suggestion would be post on farimark.com and look for a response from Alan S.
Looks like you will need the 1040x for each year....
Changing from roth to Trad will not help, as your total contribution to ANY IRA is what matters. Did your custodian show 2 years' worth of contributions on your '04 5498?