2011 Excess Roth Contributions

[David]

TP had $1,600 excess Roth contributions in 2011. The penalty was reported on Form 5329 and we discussed that he needed to get the 2011 excess contribution recharacterized by his broker as a 2012 contribution.

 

He made no contribution for 2012 and I recently found out that he never had the 2011 contribution reclassed with his broker as a 2012 contribution. During 2014 the broker characterized the 2011 contribution as a 2014 contribution. The TP made a contribution in 2013 which was allowable.

 

The 2012 Form 5329 shows the 2011 $1,600 excess contribution carried forward to line 19 in Part IV. Line 19 shows $3,300 (the difference between the 2012 allowable contribution and the 2011 excess contribution) thereby, zeroing out any continued excess contribution.

 

Is ATX treating this correctly?

 

I thought the excess Roth contribution had to be shown as recharacterized to the following year by the broker in order to not be subject to the penalty.

 

Shouldn't the $1,600 excess contribution be shown for 2011, 2012 and 2013? If so, how do I get the 5329 to correctly report the excess contribution?

 

Thanks.

[Catherine]

If your client made no Roth contribution in 2012 but was eligible to, the excess from 2011 can be counted as a 2012 contribution.  That does not negate the 2011 penalty - but it does stop an endless carry-forward of the excess.