Dave W
Level 3

My first year with these clients.

Clients live with each other, but 1040 filing status has been 'married, filing separately' for decades.

One spouse has been funding a Roth IRA since 2011. However, clients' financial adviser did not financially advise clients to avoid filing separately. No other tax preparer (since 2011, at least) has ever advised clients to avoid filing separately.

Spouse has now taken corrective distributions for 2020 and 2021 Roth IRA contributions. In addition, all future scheduled Roth IRA contributions have been stopped. However, there still remains the small issue of about 9 years of excess Roth IRA contributions for the years 2011 through 2019. I haven't prepared the 5329's for those years, but I expect the penalty to be in excess of $25,000 (before interest).

I am hoping that there is a reasonable cause exception to the penalties to help these nice folks out, but I don't see where the 5329, Part IV has the space to list an exception to the penalty. Does anyone have any options to offer, other than "Make your check payable to U.S. Treasury"? 

Many thanks!!!

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