Retirement tax questions

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@Mas_Char_02_31 wrote:

 

You seem knowledgeable on Roth IRA Excess Contribution Withdrawals in TurboTax. 

 

Discovered in March 2019 I was over the AGI limit, so my 2017 and 2018 Roth IRA contributions were considered Excess Contributions.  Vanguard said to withdraw (which I did in March 2019), and that only current year (2018) would need to report earnings.  Any earlier years excess contributions would be assessed a 6% penalty, but no calculation for gains/loss would be considered.

 

The 2019 1099-R shows one line item consolidating 2017+2018 removal of the excess.

Gross Distribution (Box 1) = 12,899.36.  Box 7 = PJ

 

2018 excess contribution withdrawn $6399.36 3/12/19 before deadline, with a loss.  So, no penalty, no taxes due. 

The 2017 contribution was withdrawn 3/12/19, full amount of $6500.  Only penalty due.

 

Questions

1.  Does each one line on the 1099-R have to equate to one entry in TurboTax?  Or am I supposed to break these out by the year the contribution was made?

2.  Does TurboTax calculate the penalty (Used to show on Line 59, now on Schedule 4)?

3.   For the 2018 excess, in TurboTax, do I plug in $6399.36 in Box 1, and Box 2a = 0, and Code P for bottom box 7 and leave top box 7 empty?

4.  For the 2017 return, in TurboTax, do I plug in $6500 in Box 1, and Box 2a = 0, and let TurboTax calculate the penalty?  What code goes in Box7 top and bottom?

 

 

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This is an old post that you are taging on to, and this might get complicated since 2017 is beyond the time limit to remove tax free.

Starting with 2017.    If you did not report the excess in 2017 then  you need to amend 2017 and add the contribution as a excess contribution that will produce a 2017 5329 form with a 6% penalty since the 2017 excess contribution was not removed by Oct 15 of 2018.

You need to do the same  6% penalty for 2018 since the excess was still not removed in 2018.

You do not owe any 2019 6% penalty because the 2017 excess was removed before the end of 2019 and the 2018 and 2019 excess was removed as a return of contribution.

Your 1099-R is incorrect if the box 1 amount includes both the 2017 and the 2018 excess contributions because it is to late to return the 2017 excess as a "return of contribution" as the code "PJ" reports.  ONLY the 2018 contribution excess should be in box 1 and the earnings attributed to that excess in box 2a.  This code PJ must be reported on an amended 2018 return.

The 2017 excess can ONLY be removed with a normal distribution which would have the amount in box 1 , a blank box 2a and box 2b (not determined checked) and a code J in box 7 (or T if older than 59 1/2).  The earnings attributed to the 2017 excess are not to be removed since the previous 6% penalty allows the earnings to remain in the account.

I suggest you contact the IRA custodian for a corrected 1099-R for  the 2018 return of contribution and a new 1099-R for the 2017 distribution that cannot be a "return of contribution" (code PJ).  What you described requires two 1099-R's.   The 2019 1099-R with code PJ reported on an amended 2018 tax return since it was a 2018 contribution,  and a 2019 1099-R with a code J (or T) reported on your 2019 tax return since it was a 2019 distribution..