Can I correct this issue for the regular Roth IRA contribution shown as "Roth IRA contribution after limitation" on my 2021 tax return? And what should I do?

[DanaB27]

To confirm, your Roth IRA contribution was limited because of your income and you had an excess contribution for 2021? If yes and you did not remove it by the extended due date of the 2021 return then you will have to pay the 6% penalty on your 2021 return, calculated on Form 5329 part IV. If you entered your Roth IRA contribution then TurboTax will automatically fill out Form 5329 if you had an excess Roth IRA contribution.  

If you were not able to apply this excess in the following years then you will have to pay the 6% penalty on your 2022 and 2023 return.

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Do you have any Excess Roth Contributions" answer "Yes"
5. On the "Enter Excess Contributions" screen enter the total excess contribution from 2021 (if it wasn't carried over).
6. On the "How Much Excess to 2023?" screen enter how much you want to apply to 2023 (this will only appear if you are able to make Roth IRA contributions and didn't max out the allowed contribution for 2023)

Repeat the steps above on your 2022 tax return.

If you are not able to apply the excess contribution to 2022, 2023, or 2024 then you should request a regular distribution of the excess contribution (without earnings) by December 31, 2024 to avoid paying the 6% penalty in 2024. 

Please see How do I amend my federal tax return for a prior year? 

[ph20850-gmail-co]

Thank you DanaB27 for responding my questions!

 No, I did not have an excess contribution for 2021. I didn’t see a form 5329 and no penalty indicated on my returns. But on my 2022 and 2023 tax returns, I did see a line showing as “2021 conversion contributions taxable at conversion $7000 (which was my contribution limits for 2021)”. I did not do any conversion contributions at all. 

Do I need care about this?

Thanks again!

[DanaB27]

To confirm, you did not enter a conversion at all on your 2021 return? If you did not have a conversion to Roth IRA in 2021 then you Roth basis tracked in TurboTax is incorrect. This would only be important if you plan on withdrawing your Roth IRA contributions before you are 59 1/2 and plan on withdrawing more than the regular contributions. Please see Ordering Rules for Distributions for more details.

After you verified that you do not have had a taxable conversion in 2021 you can edit the Roth basis in TurboTax:

1. Click on "Search" on the top right and type “IRA contributions” 
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Select "Yes" on the "Let is Track your Roth IRA basis"
5. On the "Tell Us the Year" screen it seems you will have 2021 checked, click "continue"
6. Delete the amount on the "Enter 2021 Conversions"