@tdo061803 wrote:
Hi
I had been making contribution to Roth IRA while living abroad and taking Foreign Income Exclusion. I realized I shouldn’t have done that after a couple of years.
I filed an excessive contribution removal form with my custodian and took the money out of Roth IRA. I used form[tk] to pay the penalty to IRS. I did it in June after filing my tax return.
This year I received a 1099-R and upon entering it into Turbo tax I was asked to pay tax on the amount I removed.
Box 7 has P. I look up what P is and the mighty Internet gave me this:
Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2020.
From my interpretation, it did recognize the amount is an excess contribution, and it’s considering taxable when I remove it.
I know Roth IRA is taxable when one withdraws money from it. In my case, I was correcting an amount that shouldn't have been there in the first place. Why is this amount taxable?
If the 1099-R was a 2020 1099-R then code P means taxable in 2019. You must amend 2019 to report it. Only the amount in box 2a is taxable. If 2a is zero then nothing is taxable and the 1099-R can be ignored. If the excess from 2019 was not removed from the IRA contribution section in 2019 and it carried over into the 2020 software then edit the IRA contribution section and remove it, because it no longer exists.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
