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htb14
Returning Member

Still getting charged excess contribution tax even though it was removed

Made an excess contribution a few years ago. Properly removed it, have the 1099-R for 2021, and the info on that 1099 is in my 2021 TT taxes. However, the excess contribution tax still continues to linger as if I never took it out and the tax has been on 2022 and now 2023(already filed).  I can easily see the 2021 1099 in TT so I'm not sure what went wrong and why it still seems to think I didn't take the excess out and continues to charge the penalty tax.  I've verified that the proper distribution codes were also used for that 2021 1099. 

What else should I be looking for? Does this require a full amendment for each of those years? Form 5329 is part of my returns but all seem to show the excess contribution amount, but not the distribution. 

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1 Reply
maglib
Level 11

Still getting charged excess contribution tax even though it was removed

@htb14 You need to let the IRS know it was returned or recharacterized.  If you did it before the year end or the following year or you converted to a roth.

The year of the excess in TT:

To enter the nondeductible contribution to the traditional IRA:

 

  1. Open your return
  2. Click “Deductions &Credits” on the top
  3. Click "I'll choose what to work on"
  4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start
  5. Select “traditional IRA
  6. Answer “No” to “Is This a Repayment of a Retirement Distribution?
  7. Enter the amount you contributed
  8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
  9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
  10. Enter your basis in the Traditional IRA from your 2022 Form 8606 line 14 (if you had a basis in the prior year)
  11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

RETURN OF EXCESS OR CONVERSION year:

To enter the 1099-Rs for the return of excess contribution and the  conversion: 

  1. Click "Federal Taxes" on the top and select "Wages & Income"
  2. Click "I'll choose what to work on"
  3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)
  4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
  5. Click "I'll Type it Myself"
  6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
  7. Click "Continue" and enter the Form 1099-R for the returned Roth IRA contribution
  8. On the "Your 1099-R Entries" screen click "Add Another 1099-R" and enter the Form 1099-R for the conversion
  9. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account
  10. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
  11. On the "Your 1099-R Entries" screen click "continue"
  12. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
  13. Answer the questions about the basis from line 14 of your 2022 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs
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