Hi folks,
In 2023 my wife and I got married and had some unexpected income, bringing our joint income into the range where our Roth IRA contributions would be limited. I didn't realize this until it was tax filing time in march 2024. Both of our IRAs had been overcontributed by $1800, each, so I tried to withdraw these contributions through vanguard. I did mine correctly (it seems) and this year received a 1099R coded JP for 2024 with approximately $200 in taxable amount (earnings) in box 2a and ~$2000 in the total amount (I told vanguard $1800 and they automatically calculated the earnings for me). If I understand correctly, I am to file a 2023 amendment with this 1099r and am liable for the taxes on the amount in 2a. Seems fair enough - but wanted to confirm?
The real issue is with my wife's withdrawal. For some reason, and I don't know why, I made a mistake and instead of going through the proper Vanguard process, I simply withdrew funds from her Roth IRA in a two step process; first, by selling $2000 worth of stocks (I guess my calculation was based on what I'd seen from vanguard) in mid march, and second, by clearing out of the vanguard settlement fund on April 16 2024.
All mistakes on my part, because now her 2024 1099R is simply coded J, not JP, and is being taxed entirely as earnings. She has nothing in box 2a. Box 2b is checked. Box 4 says $201 was withheld in federal taxes. When I enter this information into the software I get a calculation of another $500 in taxes. This seems wrong?
As I see it we have several problems.
1. Coding J vs JP. I called vanguard and they said there's nothing they can do, since the transactions happened so long ago. Such is life. I figure this is just the deal, and I'll have to pay for the consequences. Do I just file the 1099r as it's been printed?
2. Year. The excess contributions happened in 2023, but I caught it in 2024. I'm not sure how this should be filed - either in 2024 or with a 2023 amendment - because of this timing, plus the two step issue in the transaction. Any advice?
