In 2023, I directed funds for both my wife and I into IRAs for Tax Year (TY) 2022 ($7,000 each) based on deferred compensation I received. I am a retiree and I did not have any earned income, so the IRAs were a mistake on my part. I realized this as I was finalizing my tax returns in October, 2023 and I attempted to reverse the IRA fundings. My wife’s IRA funding was reversed in time to meet the deadline of October 15th. However, my application was not completed by the Brokerage and I had to resubmit the reversal after the deadline. The reversal was finalized on Nov. 17, 2023.
Since I submitted the original reversal ahead of time, I assumed it would be completed before the deadline. As a result, I didn’t include the IRA funding in my tax return. In addition, I then received a 1099-R for TY 2023 for the reversal of the $7,000 Excess Contribution for my account.
As a result, I assume I need to file an Amended Return for TY 2022 to show the Excess IRA Contribution of $7,000 for myself and pay the penalty. I also need to include the 1099-R for the Distribution of the Excess Contribution. The 1099-R shows Distribution Code 7 (“Normal Distribution”) in Box 7, which when entered into TurboTax results in taxes being applied the reversed Excess Contribution. The Brokerage has stated that they are following the IRS guidance.
Two questions:
- Can I include the 1099-R for TY 2023 in my Amended Return for TY 2022 or do I need to include it on my TY 2023 return?
- How do I handle the 1099-R, which has Distribution Code 7 on it, so that I am not taxed on the Reversed Excess Contribution?
Thank you
