Retirement tax questions

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@ahmadka2 wrote:

Hi @DanaB27, I had two more questions to ask:

 

1) So I have withdrawn the excess contribution (plus its earnings) I made in 2020. If I choose to NOT report a 1099-R on my tax return now and am okay with filing an amendment for 2020 tax return next year (after getting the 2021 1099-R), do I even need to do anything related to my Roth IRA when filing 2020 tax return now ? Do I need to even state on my 2020 tax return now that I contributed to my Roth IRA in 2020, since all of it (plus earnings) is withdrawn now ? If I don't need to deal with any of this, would it create a problem with IRS when they receive a Form 5498 showing contributions I made which I didn't mention in my 2020 tax return ?

 

2) Hypothetically speaking, suppose I did any other IRA related activity this year which is a taxable event (and so deserves a 1099-R next year), will I get TWO 1099-Rs next year ? One with code P mentioned in Box 7 to indicate it's for contributions made in 2020, and one with code P in Box 7 which relates to the taxable event I do THIS year in 2021 ?

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#1)   Of course you can wait for the actual 1099-R and then amend 2020 to report it.  The ONLY thing that goes on your tax return at all is line 4b on the 1040 form that will have the taxable earnings.     The only reason to enter it now is to avoid having to amend next year.    Also the return for Roth contribution made in 2021 for 2020 will have a code "PJ" in box 7, the total amount returned in box 1 and the earnings in box 2a.

#2)  The 1099-R for the return of contributions will be separate and in additional to any other 1099-R's that you might receive for any other distributions.    Nothing about a return of contribution with a code PJ goes on your 2021 tax return.

You would only enter it now if you *know* from the IRA custodian that the 2021 1099-R will, in fact, have code PJ and you know the box 1 and 2a amounts - otherwise just wait for the real 1099-R next year.