Deductions & credits

To verify, you are talking about a traditional IRA.

Yes, you can request a return of contribution with your financial institute for the amount that was nondeductible or you can leave them in the account and track your basis (nondeductible contributions) on Form 8606.  Your contribution might be nondeductible but you are allowed to make it if you had the taxable compensation. If you had an excess contribution TurboTax will warn you about the penalty. If you only get the screen it is nondeductible then you are allowed to make the contribution. 

Your financial institution should be able to calculate the earnings on the return of the contribution. The earnings will be subject to the 10% early withdrawal penalty if you are under 59 1/2.

If you remove part of the contribution then please correct the amount contributed in the Deduction & Credit section:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"

You will get a 2022 Form 1099-R in 2023 with codes P and 1 (if you are under 59 ½, otherwise it will be P and 7). This 1099-R will have to be included on your 2021 tax return and you have two options: 

• You can wait until you receive the 2022 1099-R in 2023 and amend your 2021 return or
• You can report it now in your 2021 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2022 1099-R into the 2022 tax return since the withholding is reported in the year that the tax was withheld. The 2022 code P will not do anything in the 2022 tax return but the withholding will be applied to 2022.

To create a 1099-R in your 2021 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-R”
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2021?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2 enter the earnings
8. Box 7 enter P and 1 
9. Check the IRA/SEP/SIMPLE box
10. Click "Continue"
11. On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.

If you are referring to a Roth IRA then please see What happens if I made an excess Roth IRA contribution.