Excess ESA contribution 2021 withdrawn May 18th 2022 – 5329 filed for 2021 and 2022?
Excess ESA 2021 contribution was withdrawn May 18th, 2022. There were no prior excess contributions.
1. Does the client need to file a “2021” 5329? It will shown no excess contribution tax. My reading of the Publication for the 5329 is that it should be attached to an amended 2021 tax return.
2. My reading from another irahelp.com posting on 9/23/2011, is that the client will also need to file a 5329 for 2022 in 2023 when the 2022 1099 is sent.? It will show no excess contribution tax.
3. Since the market has dropped between the 2021 contribution and May 18, 2022 draw, I assume there is no taxable income in 2021? No taxable income in 2022?
Many thanks as always ….. Mary!
Permalink Submitted by Alan - IRA critic on Tue, 2022-06-21 15:26
Since client withdrew the 2021 excess contribution before the deadline, there is no need for the beneficiary to file a 5329. If client received back less than the excess due to market losses, there is also no earnings taxable in 2021. The 1099 Q should therefore not show any taxable earnings when it is issued next January. Therefore, no additional tax reporting is needed by the beneficiary.