Similar question regarding Removing Roth IRA Excess contributions, but for Prior years.
- Have 4 years of Excess contributions that were just discovered March of this year. (didn't know my AJI was over the limit)
- Vanguard system did not prevent me from contributing, so doing so, therefore I assumed it was okay.
- Vanguard told me I needed to remove the excess, which I did, in March 2019.
- Vanguard and TurboTax Experts explained none of the Removals are taxable,
- The 2018 removal is taxable, but there was a loss, so 0 taxable
- The 2015/16/17 (called Prior Years), the gains are not considered, and instead, a 6% penalty applies. Quote from TurboTax Expert "2017 excess can only be removed with normal distribution with amount in box 1, blank in 2a and 2b, (not determind checked) and Box 7 = T (over 59 1/2).
- Received a 1099-R from Vanguard in Feb, 2020, that looks like this:
- 12,899.36 (combined 2017+2018), Code PJ. (BTW, this works perfectly in TurboTax)
- 13,000 (combined 2015+2016), Code T (with "tax not determined" checked). This not working.
- TurboTax Expert says the 1099-R is incorrect. Says there should be one 1099-R for 2018, and a separate 1099-R for 2015, 2016, 2017, since Prior Years can only be reported as Normal Distribitons (Code T)
- I have created a table below if you need to see the exact dates of the contributions and withdrawals.
I did some research (both with TurboTax Community Experts and H&R Block), and I think these are the steps I need to take:
- Figure out how to get all the amounts to show up on TurboTax (1040) as non-taxable, because I've already paid taxes on this money (yes...I know about the 6% penalty...getting there), or to figure out why TurboTax is treating the Prior year's Excess as either tax or penalty when entered in IRA Income form.
- File my 2019 taxes in TurboTax once Step 1 is completed successfully
- Go back and amend my 2015/16/17/18 TurboTax returns as follows:
- TurboTax / Amend / 2016 / Other Taxes / Fill out the Excess Contribution questions to calculate my 6% cumulative penalties. Repeat for the other 3 years.
- This will generate the form 5329 (for that specific year) and result in the "amount due" that I then mail to IRS with the check.
- To the best of my knowledge (from reading TurboTax Expert responses, that is the process I'm supposed to follow? Correct?
So, here are my questions
- Am I missing any steps? Are the sequences correct?
- Why is my 2nd entry (the 2015+2016) excess generating a $3120 fee/tax? This should be non-taxable. There is no code available for Excess Contributions in Prior Years. The closest is Q (normal) and if I use that, everything is perfect.
- If I am missing anything, can you tell me the exact steps I am supposed to take?
| Contribution Date | Dollar | Withdrawal Date | Dollar | |
| 2015-08-19 | $6500 | 2019-03-22 | $6500 | 6% penalty, no tax |
| 2016-09-30 | $6500 | 2019-03-22 | $6500 | 6% penalty, no tax |
| 2017-02-09 | $6500 | 2019-03-22 | $6500 | 6% penalty, no tax |
| 2018-01-10 | $6500 | 2019-03-19 | $6399.36 (loss) | 6%+tax on gain (0) |
This is what I think the 1099-R "should" look like, but I need to figure out why TurboTax is charging me $3120 for Line 2 when entered.
Line 1 (the 2018 Excess Withdrawal): Box 1: 6399.36, Box 2a and b: blank, Box 7: PJ.
Line 2 (the 2015/16/17 Withdrawal): Box 1: $19,500, Box 2a and b blank, exception checked, Box 7: T
