Hi! I have a similar situation to the second responder in that my husband (aged 60) made a contribution to a Traditional IRA in early 2023 of $7,000 but later reversed it before the end of the year since we had some extenuating circumstances resulting in cash needs. He did not, however, adjust the withdrawal for any earnings on the contribution. Because of this, the custodian issued a 1099-R for 2023 with a Gross Distribution in Box 1 of $7,000 and a Taxable Amount in Box 2a of $7,000 and Distribution Code 8. We have spoken to the custodian many times in early 2024 to express our concern that this 1099-R is incorrect and that only the earnings on the contribution should be taxable and appear in Box 2a. We were told that since my husband did not include the earnings in the total withdrawal of the original contribution when he originally filled out the Distribution Form with them on 11/15/23, they must report the entire withdrawal as taxable and they refuse to make any changes since they "aren't allowed to backdate anything and make changes to a prior year" and my husband can't either.
I entered all of our IRA information as provided on the 1099-R into TurboTax. TT is treating the original contribution of the $7,000 as a contribution that is limited to earned income of $6,765 with a remaining excess (nondeductible) contribution of $235. The reversal distribution of $7,000 on 11/15/23 is being treated as a fully taxable distribution by TT since is it marked as so on the 1099-R. This makes sense to me in that the tax implication would almost be a wash except for the $235 excess that is nondeductible.
My question is two-fold: Do I just calculate the earnings on the $235 excess contribution and report that on the 2023 return and file with the 1099-R as it stands (we plan to withdraw the earnings prior to October 15, 2024 as we are on extension), or do I file with a substitute 1099-R with the total of the original contribution of $7,000 plus earnings in Box 1 and just the earnings (taxable amount) in Box 2a?
Thank you!
