Retirement tax questions

2020 and 2021 tax questions:

1) Yes, you will have to fill out 2020 Form 5329 part IV to calculate the 6% penalty on the 2020 excess contribution (without earnings/loss).

2)Yes, you will have to fill out 2021 Form 5329 part IV to calculate the 6% penalty on the 2020 + 2021 excess contribution (without earnings/loss).

2022 tax return.

1) Yes, you will have to fill out 2022 Form 5329 part IV to calculate the 6% penalty on the 2020 + 2021 excess contribution (without earnings/loss). You can use these steps to enter it into TurboTax:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Continue through the questions until you get to the "Do you have any Excess Roth Contributions" screen and answer "Yes"
5. On the "Enter Excess Contributions" screen enter 2020 + 2021 excess contribution.

2) Yes, you will request a withdrawal of excess contributions plus earnings for the 2022 excess contribution. You will get a 2023 Form 1099-R with code PJ and this will have to be entered on your 2022 tax return. For the excess from 2020 and 2021, you will request a regular distribution (without earnings and losses) and will receive 2023 Form 1099-R with code J and this will be entered on your 2023 tax return.

3) Yes, You will get a 2023 Form 1099-R  in 2024 with codes P and J for the withdrawal of excess contributions for 2022 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 on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2022?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter J and P
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2023 Form 1099-R.
11. Click "Continue" after all 1099-R are entered and answer all the questions.
12. 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 click "Continue")

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.

4) On your 2023 return you will enter Form 1099-R with code J:

1. Login to your TurboTax Account 
2. Click on "Search" on the top and type “1099-R” 
3. Click on “Jump to 1099-R” and enter all your 1099-Rs
4. Click "Continue" on the "Review your 1099-R info" screen
5. Answer all the questions and make sure you enter the net contributions prior to 2023 (direct contributions minus distributions, include the 2020 and 2021 excess contribution in this amount) on the "Enter Prior Year Roth IRA Contributions" screen
6. Answer the remaining question.

5) A) and B) Yes.

5) C) No, you will have to have to report the regular distribution of the 2020 and 2021 excess on your 2023 tax return. But since you withdraw only contributions they won't be taxable. Please make sure that you enter your net contributions in the follow-up questions.

Please see What happens if I made an excess Roth IRA contribution for additional information.

[Edited 3/16/2023 | 5:58 am PST]

@michaeljordan198