Retirement tax questions

Yes, you will include the value of all Roth IRAs (for the IRS all Roth IRAs are considered one account). You will also enter all of your net contributions (from all of your Roth IRAs) when TurboTax asks (next year on your 2023 tax return).

You will need to pay the 6% penalty for the 2021 excess twice, once on your 2021 return and once on your 2022 return. Excess contributions are taxed at 6% per year for each year the excess amounts remain in the IRA. You didn’t remove the excess until 2023 therefore you will have to pay the 6% penalty on the 2021 excess on your 2021 and 2022 returns.

You seem to have entered the 2021 excess correctly on your 2022 tax return and see the 6% penalty. Now you will have to amend your 2021 tax return to add the Roth IRA contribution to create Form 5329 and get the 6% penalty calculated.

Your custodian will provide you with a 2023 Form 1099-R with codes P and J for the withdrawal of the 2022 excess contribution plus 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 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" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.

Please make sure that the 2021 excess is withdrawn as a regular distribution without any earnings. This 2023 Form 1099-R should have code J and will be entered on your 2023 tax return.

[Edited 4/3/2023| 9:58 am PST]

@gjgogol