I know this has been answered before, but I need it applied to the following fact situation:

1. Taxpayer makes an excess Roth Contribution for 2000 during 2000.
2. Taxpayer makes an excess Roth Contribution for 2001 during 2001.

Excess is discovered for both years while preparing the 2001 return. Amounts for both years are removed before 4/15/2002.

Questions:

1. Does the 6% Form 5329 penalty equal $120 or $240 (assuming no losses in the Roth), since the excess 2000 contribution is removed in 2002? If there are earnings on the Roth, are the earnings taxable in 2002? How does the Form 5329 show the distribution of the excess contribution, so that no future excise taxes are owed?

2. Is there no Form 5329 penalty for the 2001 contribution, since it is removed by 4/15/2002? In addition, if there were earnings, are the earnings taxed in 2001?

Thanks for any assistance!

File a 5329 for 2000 and pay the 6%, you didn't pull it out by 4/15/2001. Also report the earnings from it on an Amended 2000 tax return.
report the 2001 earnings on your 2001 tax return.