More tax help: filed IRA distribution forms for wrong year. Do I correct it or no?

Finance Tax
1

Early 2016 I maxed out a ROTH IRA, $5500.

Early 2017, I am preparing my 2016 tax return, when I realize that I was not eligible for a ROTH IRA contribution for 2016. I call Vanguard, and have the contribution reversed. By this time, the $5500 turns into $6300. I file forms 5329 and 8606 on my 2016 tax return, and pay the penalties for the reversal.

I am now trying to file my 2017 tax return. Among my documents is a 1099-R that Vanguard sent me for the IRA contribution reversal which happened a year earlier. What do I do now? I have already filed the forms for this earlier mistake, and paid the taxes and penalties. It was about $300.

I called the IRS to ask them, and the lady I spoke with told me to just add a note to my return that I already took care of this on my 2016 return. I don’t see a way to attach a note when using Free Fillable forms. I really want to avoid having to file an amended return, $300 is almost not worth the headache, on the other hand, I would hate to have to pay for this twice.

2

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3

I’d just file it without the 1099-R, and you can explain yourself if/when they send you a bill.

I suspect the right thing would have been to pay the penalty with the 2017 return, not 2016.

4

Glad your investment went well anyway. What exactly did you do to the 2016 contribution? Did you recharacterize it to a traditional IRA or did you undo it altogether?

http://community.hrblock.com/t5/All-Things-Tax/Reverse-or-undo-a-Roth-IRA-contribution-from-the-same-year/td-p/68296

Sounds like the IRS gave good advice.

5

The 2016 contribution was reversed as if it never happened. The money just went back into my brokerage account.