gwhyland
New Member

How to report 2017 excess Roth IRA contribution widthdrawd in December 2018 with 1099-R received with code J8. Inputted 1099-R in Turbotax but don't see the 6% penalty

 
dmertz
Level 15

Retirement tax questions

The 6% penalty only applies to any earnings shown in box 2a of the code J8 Form 1099-R.  If the amount in box 2a is zero, you'll have no tax or penalty from entering the Form 1099-R.

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gwhyland
New Member

Retirement tax questions

I made an excess contribution to the Roth in 2017 of $6500.

If your total IRA contributions (both Traditional and Roth combined) are greater than the allowed amount for the year in your situation, and you have not withdrawn the excess contributions, you must complete Form 5329 to calculate a 6% penalty tax on the excess contribution
dmertz
Level 15

Retirement tax questions

If you made a $6,500 excess contribution for 2017 that was not corrected, your 2017 tax return would show a 6% penalty on the $6,500.

When did you make the Roth IRA contribution for 2017?
Did you make any Roth IRA contribution for 2018 in 2018?
gwhyland
New Member

Retirement tax questions

I forgot to put the $6500 Roth contribution on my 2017 taxes.  So maybe I need to amend 2017.  

I also made an excess Roth contribution of $6500 in Jan of 2018 but realized my mistakes and withdrew it in December to avoid the penalty for 2018.
dmertz
Level 15

Retirement tax questions

When did you make the Roth IRA contribution for 2017?

What are the amounts in boxes 1 and 2a of the code J8 2018 Form 1099-R?
gwhyland
New Member

Retirement tax questions

Roth IRA contribution for 2017 was in January.

Amounts in boxes 1 and 2a of the code J8 2018 are $6586 and $72.78
dmertz
Level 15

Retirement tax questions

The code J8 2018 Form 1099-R is reporting the return of your 2018 contribution, but the numbers don't make sense.  Box 1 should be the amount you contributed for 2018 and had returned to you ($6,500) plus the $72.78 of earnings shown in box 2a.  The $72.78 is subject to tax and, if you were under age 59½ at the time of the distribution in December 2018, to a 10%, $7 early-distribution penalty, reported in Part I of 2018 Form 5329.  (If you were over age 59½, you'll need to claim an Other reason exception to the 10% early-distribution penalty on the $72.78.)

It appears that you have not yet corrected the excess contribution made for 2017.  Yes, if not already reported with your 2017 tax return, you need to amend your 2017 tax return to include Form 5329 to report the excess $6,500 contribution and pay the 6%, $390 penalty for 2017.  In 2018 TurboTax, in the traditional IRA contribution section you'll need to indicate that you have a $6,500 excess contribution carried in from 2017.  2018 TurboTax will prepare Part IV of Form 5329 to calculate the $390 penalty for 2018.

To avoid having an excess contribution penalty again for 2019 you must make a regular distribution from your Roth IRA (not a return of excess contribution before the due date of your tax return) of exactly the amount of the excess contribution made for 2017, $6,500.  This will be included in Part IV of your 2019 Form 5329 to eliminate the excess.

Assuming that you correct the 2017 excess contribution in 2019, in all you will have paid $780 in excess contribution penalties ($390 for 2017 and $390 for 2018).
gwhyland
New Member

Retirement tax questions

Thanks for all the info.  I thought the 2017 excess penalty would be taken care of on the 2018 taxes but now realize I do need to amend my 2017 tax return for this.

I agree with the numbers don't make sense.  Now I realize that I had the 2 1099-R forms mixed up.  The 2017 Roth 1099 has distribution has code T and 2018 Roth has code J8.  

All set now