Retirement tax questions

If you withdraw the excess contribution and earnings before the extended due date then you can avoid the 6% penalty.  Please see the Withdrawal of excess contributions for details. Therefore, if you remove the excess contribution for 2022 plus earnings before October 16, 2023, then you don't have to pay the 6% penalty on your 2022 tax return for the 2022 excess contribution.

If you miss the deadline then you will have to pay the 6% penalty and remove the excess by requesting a regular distribution (without earnings or losses).

You will have to pay the 6% penalty for the 2020 excess on your 2020 return. Enter your contribution and TurboTax will calculate the penalty on Form 5329.

You will have to pay the 6% penalty for the 2020 and 2021 excess on your 2021 return. You will enter the contribution for 2021 and enter the 2020 excess when TurboTax asks about the prior year's excess. TurboTax will calculate the penalty on Form 5329.

You will have to pay the 6% penalty for the 2020 and 2021 excess on your 2022 return. You will enter the contribution for 2022 and enter the 2020 and 2021 excess when TurboTax asks about the prior year's excess. On the penalty screen, you will enter that you removed the 2022 excess contribution. TurboTax will calculate the penalty for the 2020 and 2021 excess on Form 5329.

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

Please request a regular distribution for the 2020 and 2021 excess (no earnings or losses) with your financial institution. You will receive a 2023 Form 1099-R with code J (if you are under 59 1/2) and this will be entered next year on your 2023 return and eliminate the excess.

Please request the withdrawal of the excess contribution for 2022 plus the earnings with your financial institution. This will have to be reported on your 2022 return. Only the earnings will be taxable.

You will get a 2023 Form 1099-R  in 2024 with codes P and J for the withdrawal of excess contributions 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 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.