I’m currently 36yo. Some time between approx 2000 and 2018 my dad contributed around 30k into a Roth for me (which I didn’t know about until a few years ago). There were a few years during that time where I was living off student loans and/or making money off the books (showing no income). I’m not sure what years he contributed but it’s definitely possible he contributed on years I wasn’t showing income. Most likely the late 2000s. I’ve contributed on my own the past few years and he recently gave me the info to transfer the account he had for me at Morgan Stanley into mine at fidelity. (Trading fees using a broker at Morgan Stanley are insane. I can’t believe people used to pay that.)
If there were contributions made on years where I showed no income, am I going to have a problem in the future?
> am I going to have a problem in the future?
When the IRS audits you, the penalties and interest will be applied and a bill sent your way.
Penalty is 6% of the overcontribution every year ongoing until the correction is made.
Interest varies on applicable time period.
You could ask for a waiver of the penalty, but there’s no guarantee of success. Interest is almost never waived.
Your next question is likely, how do I fix this?
Depends on what you want:
* Easiest, but most expensive: Hire a CPA/EA. Answer questions. Let them figure things out.
* Cheapest, but most involved: Figure out what years. The custodian should have that data. Alternatively, submit transcript requests to the IRS with specific attention to copies of Form 5498 that the IRA custodians must send in. You’d have to submit a request for every year you suspect a contribution was made. If there was, in fact, a contribution made, the IRS would have received a Form 5498. Then you’ll need to submit a tax return starting with the earliest overcontribution with the penalty calculation. Repeat for every subsequent tax return. And the end of all this, don’t forget to pay the IRS.
IRS recommends you only keep tax records for three years. It’s in their website. Looks to me like you are in the clear, but I have no other way to back that up.
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