Retirement tax questions

Yes, a rollover occurs when you return the withdrawn funds within 60 days into the same or similar retirement account. (IRS)

Therefore, you can return (rollover) the proper contributions, the earnings, and the 2022 excess contribution. It will not count as a 2023 contribution. You do not need to return (rollover) the 2020 and 2021 excess contributions since taking a regular distribution fixes the excess contribution.

You then can request to withdraw the 2022 excess contribution plus earnings to avoid the 2022 penalty for the 2022 excess contribution only (you still have to pay the penalty in 2022 for the 2020 and 2021 excess). It is important to fill out the correct withdrawal form so your institute codes Form 1099-R correctly.

You will get a 2023 Form 1099-R  in 2024 with codes P and J for the withdrawal of excess contribution and earnings. This 1099-R will have to be included on your 2022 tax return and you have two options:  

• You can wait until you receive the 2023 Form 1099-R in 2024 and amend your 2022 return or
• You can report it now in your 2022 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 2023 Form 1099-R into the 2023 tax return since the withholdings are reported in the year that the tax was withheld. The 2023 code P will not do anything to the 2023 tax return but the withholdings will be applied to 2023.

To create a Form 1099-R in your 2022 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click "Federal Taxes" and select "Wages & Income"
3. Click "I'll choose what to work on"
4. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
5. Answer "Yes" to "Did you get a 1099-R in 2022?"
6. Select "I'll type it in myself"
7. Box 1 enter total distribution (contribution plus earning)
8. Box 2a enter the earnings
9. Box 7 enter J and P
10. Click "Continue"
11. On the "Which year on Form 1099-R" screen say that this is a 2023 Form 1099-R.
12. Click "Continue" after all 1099-R are entered and answer all the questions.
13. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" if you are over 59 1/2 (if you are under 59 1/2 and removed the excess after December 29, 2022, then enter it next to "Corrective Distributions made on or after December 31, 2022")

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2021" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.

Please follow these steps to get to the IRA contribution section:

1. Click “Deductions &Credits” on the top
2. Click "I'll choose what to work on"
3. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
4. Select “Roth IRA”
5. Enter your 2022 contribution
6. On the "Do you have any Excess Roth Contributions" answer "Yes"
7. On the "Enter Excess Contributions" screen enter the total excess contribution from 2021 and 2020

@mgd1770