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

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.

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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.

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?

Sounds like the IRS gave good advice.

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