Hello,
In tax year 2021, I contributed $6,000 to my Roth IRA. I found later the IRS rules stating my AGI was too high, and was therefore not eligible to make any 2021 contribution to my Roth IRA. My age is under 59 1/2 years. TurboTax flagged the $6,000 excess contribution.
I called my bank and withdrew the excess contribution ($6,000) plus bank calculated earnings ($477.49) in calendar year 2022, prior to the April tax filing deadline.
I eventually filed an extension because I needed more time figuring how to express the withdrawal in TurboTax desktop edition. I combed threads on this board and found
@DanaB27's answer on creating a 1099-R (I don't have the actual 1099-R form because the bank won't provide it to me until January 2023). Therefore I did the following:
- Created a 1099-R form
- Entered $6,000 in box 1
- Entered $477.49 in box 2a.
- Entered codes J and P in box 7
- Selected 2022 in response to "which year on form 1099-R"
It is my understanding that I am only obligated to pay a 10% penalty on the earnings ($477.49), which comes out to $48. However, I see TurboTax is also calculating that I owe 6% on the excess contribution of $6,000, which comes to $360.
To make matters more perplexing, TurboTax prompted for my Roth IRA value on December 31, 2021. Upon entering it, TurboTax calculated the aforementioned $360 penalty on form 5329. If I enter $0 instead, then it calculates a "$0" penalty. I thought I wasn't even obligated to enter any info on form 5498 in TurboTax.
So, I have multiple questions:
1. Did I enter my 1099-R correctly?
2. I thought that because I withdrew the $6,000 excess contribution ahead of the 2021 filing deadline that I am not subject to this 6% penalty of $360. Is this not the case?
3. Why does TurboTax calculate the $360 penalty when I provide my Roth's year end balance? Does the IRS require I provide the year end value?
