DanaB27
Expert Alumni

Retirement tax questions

If you had excess contributions to a Roth IRA and want to avoid the excess contributions tax then you need to:

  • withdraw the excess contributions from your IRA by the due date of your individual income tax return (including extensions); and
  • withdraw any income earned on the excess contribution.

Please contact your financial institution on how to withdraw the excess contribution plus earnings.

 

After you have withdrawn the complete contribution with all earnings you do not have to include the contribution on your tax return in the Deduction and Credit section.

 

You will get a 1099-R in 2021 for the withdrawal of the excess contribution which has to be included in your 2019 tax return. You have two options, you can wait and amend you 2019 tax return when you get the 1099-R or you can report it now by using these instructions: 

 

Solution Reporting of Withdrawal of an excess contribution

Solution from macuser_22

 


You can just report it now and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/of box 12 State withholding. Then you must enter the 2018 1099-R in to the 2018 tax return since the withholding is reported in the year that the tax was withheld. The 2018 code P will not do anything in 2018 but the withholding will be applied to 2018.

You would enter the 1099-R with the total distribution in box 1 (the contribution plus the earnings),

The earnings in box 2a,

Enter code "P" in box 7 (Top) - don t worry that it will say "taxable in 2016 "

Enter code "J" in box 7 (Bottom).

On the "Which year" screen say that this is a 2018 1099-R.

After the 1099-R summary screen press continue.

If you are over 59 1/2 then on the "Lets see if we can lower your tax bill" enter the box 2a amount in the "Another Reason" box to eliminate the 10% early withdrawal penalty on the earnings.

Enter the explanation for the excess contribution and that you are reporting a 2018 1099-R on your 2017 tax return to avoid having to amend in 2018.

The box 2a earnings will be taxable income reported on line 15b on the 1040 form and if under age 59 1/2 will also be subject to a 10% penalty on a 5329 form that will be reported on line 59 on the 1040 form.

 

 

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