Should I file an IRA amendment for 1099-R for prior year?

[diaolilin]

Hi, tax experts,

 In 2022, I contributed $6,000 to my Roth IRA, which I recharacterized to a traditional IRA in March 2023. The recharacterized amount, including earnings, was $8,400. Initially, I believed that I had over-contributed to my traditional IRA since the total amount exceeded the $6,000 annual limit. Consequently, I withdrew the excess $2,400, which resulted in taxes and penalties on the earnings. Here are the details.

- 06/2022: Contributed $6000 to Roth IRA
- 03/2023: Recharacterized $8,400(Roth IRA contribution plus earnings) from Roth IRA to traditional IRA due to high income.
- 03/2023: Withdrew $2400 from traditional IRA for 2022 because I mistakenly thought I had made an excess contribution to traditional IRA.
- 04/2023: Report the recharacterization without 1099-R and report the withdrawal by filing Form 4852 with code 1 and 'P', a substitute for 1099-R.
- 01/2024: Received two 1099R forms for the $8400 recharacterization and the $2400 withdrawal, marked with codes 1 and 8.

My questions are

- Should I file an amendment for both the recharacterization and the withdrawal, which were for 2022 but were done in 2023?

-If I should, how to file an amendment?

I really appreciate if anyone can help me with these questions. Thank you!

[DanaB27 · Accepted solution]

You can ignore the Form 1099-R with code R for the recharacterization. A Form 1099-R with code R will do nothing to your return. The recharacterization should have been reported on your 2022 tax return with these steps:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”
5. Answer ‘Yes” on the “Roth IRA Contribution” screen
6. Answer “No” to “Is This a Repayment of a Retirement Distribution
7. Enter the Roth contribution amount $6,000
8. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount of $6,000 (no earnings or losses) on the next screen.
9. TurboTax will ask for an explanation statement where it should be stated that the original $6,000 plus $2,400 earnings were recharacterized.

They should have send you a Form 1099-R with code P and 1 for the return of a 2022 contribution plus earnings but since they send you Form 1099-R with code 8 and 1 you want to enter it on your 2023 return and amend your 2022 return to remove the Form 1099-R with codes P and 1. Please be aware you do not have to pay the 10% early withdraw penalty on the earnings. The tax law regarding this was changed starting December 29, 2022.

1. Click "Continue" after all 1099-R are entered and answer all the questions.
2. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

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

[diaolilin]

Thank you for your prompt response!

Can you confirm the following steps I should take?

• I don’t need to file the 1099-R with code R for recharacterization in the 2023 return since it’s been reported in the 2022 return.

• I should include the 1099-R with codes 1 and 8 in the 2023 return.

• After the return is accepted, I should amend the 2022 return by removing the 1099-R with code 1 and P.

In addition, I have a question for the withdrawal. Since I’ve already paid the 10% penalty in my 2022 return, should I amend the 2022 return or file the 2023 return to get it back?  How?

I really appreciate your help!

[DanaB27]

Yes, you don’t need to file the 1099-R with code R for recharacterization in the 2023 return since it’s been reported in the 2022 return.
 

Yes, you should include the 1099-R with codes 1 and 8 in the 2023 return.
 

Yes, you should amend the 2022 return by removing the 1099-R with code 1 and P.

You will need to amend your 2022 tax return to get the 10% penalty payment refunded. You will need to remove the Form 1099-R with code 1 and P and then TurboTax will remove the penalty.

[diaolilin]

Thank you!

I do enter  all 1099-Rs and answer all the questions. But when I continue , I don't see the "Did you use your IRA to pay for any of these expenses?" screen and hence can't enter the amount of earnings under "Corrective distributions made before the due date of the return". Why?

The good news is that filing the 1099-R for $2400 withdrawal with code 1 and 8 doesn't change my tax refund. Should I still report the earnings under "Corrective distributions made before the due date of the return"?

[DanaB27]

Do you have an amount in box 2a (earnings) on your Form 1099-R with code 1 and 8? If not then you don't have any earnings and therefore TurboTax will not have the "Did you use your IRA to pay for any of these expenses?" screen. Only earnings in box 2a would be taxable for this distribution.

[diaolilin]

In my 1099-R with codes 1 and 8,

1. Gross distribution: $2400,

2a. Taxable amount: $0

2b. Taxable amount not determined: unchecked

Total distribution: checked.

Since there is no "Did you use your IRA to pay for any of these expenses?" screen, should I do nothing after entering the 1099-R for the 2023 return and wait until the return is accepted by IRS, then amend the 2022 return to remove the substitute 1099-R to get the refund of 10% penalty?

[DanaB27]

Yes, you don't need to do anything after entering the 1099-R for the 2023 return.

Before amending your 2022 tax return please verify if you had the penalty because if you entered a Form 1099-R with code P and J with $0 in box 2a (no earnings) then TurboTax won't calculate the penalty. Please check if you had Form 5329 with a penalty showing on line 4. 

If you don't show the penalty and entered $0 for box 2a then you do not need to amend your 2022 tax return since a Form 1099-R with code 1 and P and $0 in box 2a won't add anything to your taxable income/affect your tax return. Therefore, amending the 2022 tax return and removing it would not change your 2022 tax return. 

If you show a penalty on Form 5329 line 4 then please see How do I amend my federal tax return for a prior year?

[diaolilin]

I did have $240 penalty plus $576 tax on the $2400 earnings in the 2022 tax return. If I amend the 2022 tax return and remove the substitute 1099-R with codes 1 and P, will I get the refund for both the penalty and the tax on the earnings? If so, how do I pay for the tax on the earnings  since the 1099-R filed with code 1 and 8 in the 2023 tax return also incurs neither taxes nor penalty. Thank you!

[DanaB27]

Yes, when you amend your 2022 tax return you will get a refund of the penalty and  tax on the earnings when you remove the Form 1099-R with codes 1 and P.

You don't need to pay any taxes on this distribution since your 2023 Form 1099-R with codes 1 and 8 shows $0 earnings in box 2a.

[diaolilin]

Thank you so much for your patient guidance and detailed response. I really appreciate it. Best wishes to you.

[qwqert]

Hello tax experts,

I have a related question and need some guidance.  After reading through the discussion treads again, I think I should "make a new post" instead of post a reply.  Thank you very much!

[diaolilin]

Hi tax expert,

I have a follow-up question about my 2022 amendment previous discussed. I tried amending my 2022 tax return to remove a substitute 1099-R, but encountered an issue filing the amendment through TurboTax desktop version. When I enter a signature date of 3/16/2024, which falls outside the allowed range of 1/1/2023 to 12/31/2023 for the 2022 amended return, and I'm unable to move forward to e-file the federal and state amended return. Is e-filing an option for the federal amended return, or should I mail it instead? Regarding the New York State return, TurboTax requires e-filing, but this signature date issue has left me unable to proceed. Can you provide guidance on this matter?

Thank you in advance for your help.

[Cynthiad66]

Yes, you can e-file your federal amended return.  You should be able to e-file your federal amended return, but if there are issues with e-filing you can mail it to the IRS.

NY will allow you to submit your amended return by mail or use their e-file system.

If you need to change or amend an accepted New York State Income Tax Return for the current or previous Tax Year you need to complete Form IT 201-X. Form IT 201-X is a Form used for the Tax Returns and Tax Amendments. You can prepare a New York Tax Amendment form on eFile.com, however you can not submit it electronically.

How to File New York Amendment

@diaolilin 

[diaolilin]

My amendment for 2022 only involves deleting a substitute 1099-R because I got the real 1099-R in March 2024, which differs from the the previous substitute 1099-R and I've already included in my 2023 return. Given this, should I just send the 1040-X form to the IRS and the IT-201-X form to the New York State tax agency, along with the actual 1099-R I received recently, rather than mailing the whole amended return that TurboTax generated? This full amended return includes the original 2022 return, which the IRS and New York State already have.

And where should I mail the federal and New York State amendment forms to?