In 2023, I started a new job that paid a lot more money so I made sure I maxed-out the ROTH IRA deposit. What I forgot to pay attention to was the combination of the sign-on/relocation bonus and the new salary put me past the upper income limit on ROTH deposits. TurboTax 2023 informed me of this when doing the 2023 return so I immediately withdrew the deposit plus the gains in the first quarter of 2024. Now I just completed entering all the information for the 2024 tax year in TurboTax 2024 and it told me that the 2023 Federal Return needs to be amended. The 2023 return knows I put the $7500 in and the 2024 return knows I withdrew the deposit and gains in 2024. The question is "Do I really need to amend the 2023 return since everything appears to be accounted for?" About the only unknown I see is that the gains that were refunded cover all money made starting with the first of the 2023 deposits all the way through 1st quarter of 2024 so I don't know how much of the gains were really accrued in 2023. TurboTax did not say the State return also requires amending.
Yes, the earnings from the withdrawals of excess contribution plus earnings need to be reported in the year you made the excess contribution. If you didn't report the earnings when you filed your original 2023 return then you will have to amend your 2023 return to add the 2024 Form 1099-R with code PJ to report the gains from box 2a. Please see How do I amend my federal tax return for a prior year?
Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2022" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2023.
Yes, the earnings from the withdrawals of excess contribution plus earnings need to be reported in the year you made the excess contribution. If you didn't report the earnings when you filed your original 2023 return then you will have to amend your 2023 return to add the 2024 Form 1099-R with code PJ to report the gains from box 2a. Please see How do I amend my federal tax return for a prior year?
Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2022" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2023.
Thank you DanaB27.
The answer made me think of this follow-up question: The activity that requires amending the 2023 tax return occurred in 2023 but the 1099-R was issued in 2024. Do I also have to report that 1099-R in the 2024 return? I suspect that if I did that, TurboTax would calculate taxes to be paid for 2024 return and thus, I would accidentally be double-taxed.
No. Since you reported the earnings on an amended return in 2023, you won't be taxed again in 2024 because of Code P being reported in Box 7.