Roth IRA bug?

[SteveKoz]

Still having trouble and it seems like a bug.  Both my wife and myself made $7k ROTH IRA deposits in 2022 that we were not qualified to do.  We withdrew it but with the market drop the withdrawn was less.  My 1099-R was $6,281;  Wife - $6,311;  When going through the EZ step it asked to enter Roth IRA contributions / Total Roth Contributions for 2022.  Below it says for 12,592 was previously entered on for 1099-R. Don't enter here.  It's combining both mine and my wife's 1099-R's.  Does the same when entering her information.   Assuming this is just a screen presentation number and not being used for calculation.  When I looked at the IRA Contributions Worksheet it shows our IRA's separate and correct on line 25.  Problem/bug comes on line 26.   When going through EZStep for me.. How much excess to 2022. Indicate how much of remaining excess contribution of $6,281 you want to credit.  I enter $6,281.   Wife.. How much of $6,311 you want to credit.. $6,311.   Contributions withdrawn before the due date.. Doesn't say for who but assuming me. $6,281.  For the wife get a message:  Because made an excess contributions of $12,622 to Roth IRA you will owe a 6% penalty.  If I walk back through the EZSteps and don't change anything the question numbers change and Federal Tax Due keeps changing.    There has to be a bug in this area of the code. 

[DanaB27]

To confirm, you made an excess contribution for 2022 but didn't have any excess in prior years? You withdrew this 2022 excess contribution in 2022 and received Form 1099- R with codes 8 and J?

If you didn't have any prior year excess then you will enter the $7,000 Roth contribution for 2022 for you and your spouse, don't enter anything on the "Enter Excess Contributions" screen and enter the contribution amount withdrawn on the penalty screen (TurboTax should ask for each of you: $7,000 for you and $7,000 for your wife if you requested the full contribution, ignore the losses here).

1. Click on "Search" on the top right and type “IRA contributions” 
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA” for you and your spouse
4. Answer ‘Yes” on the “Roth IRA Contribution” screen
5. Answer “No” to “Is This a Repayment of a Retirement Distribution (your questions)
6. Enter the Roth contribution amount for you
7. Continue through the question
8. Answer “No” to “Is This a Repayment of a Retirement Distribution (spouse's questions)
9. Enter the Roth contribution amount for your spouse
10. Continue through the question
11. You will get a warning about the excess contribution for you and the penalty screen for you (enter the contribution amount removed $7,000)
12. You will get a warning  about the excess contribution for your wife and the penalty screen for your wife (enter the contribution amount removed $7,000)

If you removed the excess contribution for 2022 before the due date of the 2022 return then you will not have to pay the 6% penalty.

Please make sure you select who the Form 1099-R belongs to when entering it into TurboTax. 

[Edited 3/28/2023 | 12:22 pm PST]

@SteveKoz

[SteveKoz]

Thanks for the reply.  Here what's going on.  We did have an over payment for 2021 as well.  We received 2 1099's each.  Mine. 2021 - 6578.32  Codes PJ and 2022 - 6281.40 Code 8J.   Wife 2021 - 6425.37 Codes PJ and 2022 6311.34 Code 8J.  2021's for both of us was withdrawn before filing 2021 taxes.  On our 2021 taxes I did state 7000 entered and 7000 withdrawn.  I know I should have used the actual amounts received but it was showing a penalty for not withdrawing the full amount which I thought was wrong.  I understand now  I should have paid the extra on 2021's return and now go back and file an amendment.  I hope there is No need for the amendment now since we're even.  🙂 

I double checked the assignments of the 1099's entered and the correct two for me and correct two for my wife.  

On step 6 Enter your roth IRA Contributions it states: $12,592 was previously entered on Form 1099R. Do NOT enter this amount here.  $12,592 is a combination of mine and my wife's 2022 1099's?   I followed your instructions and entered 7000.

On the screen Enter Excess Contributions for Prior Years I entered 7000

How Much Excess to 2022? Indicate how much of remaining excess contribution of $0 you wan to credit towards 2022 Roth IRA Contributions.   Entered 0

When I got the penalty screen I entered the 7000.

When I get to my wife's Enter Your Roth IRA Contributions I get the same message: $12,592 was previously entered on Form 1099R. Do NOT enter this amount here. 

I entered 7000.

On the screen Enter Excess Contributions for Prior Years I entered 7000

How Much Excess to 2022? Indicate how much of remaining excess contribution of $0 you wan to credit towards 2022 Roth IRA Contributions.   Entered 0

When I got the penalty screen I entered the 7000.

It seemed to accept everything but we're not 100% confident. Why is turbotax adding both our 1099's together?  Why is it saying don't enter that amount like it already knows about it?  And yet we add the 7000?  AND the same $12,592 comes up for both me and my wife?    Please let us know.   Thanks again for the help!

[DanaB27]

Yes, you entered correctly the contribution amount (and not the distribution amount) on the penalty screen during the IRA contribution interview on your 2021 return.

Yes, $12,592 is a combination of your and your wife's 2022 Form 1099-Rs with code 8J. 

You can either not enter the $7,000 Roth contribution at all since you withdrew it in 2022 (therefore the note not to enter it) or enter it and then enter on the penalty screen that you removed the $7,000 excess contribution before the due date.

No, don't enter anything for Excess Contributions for Prior Years, you removed the 2021 excess before the due date of the 2021 return and therefore you don't have an excess from prior years.

When everything is entered correctly you should not have a 6% penalty on your 2021 or 2022 return.

Please make sure that you include the 2022 Form 1099-R with codes P and J on your 2021 return if you haven't done this before. Please see How do I amend my federal tax return for a prior year?

@SteveKoz 

[SteveKoz]

Appreciate the help.  

 Excess Contributions for Prior Years - I thought this needed to tied to the 2021 1099's that came as 2022 1099's with the prior year codes.  Should those 1099's be reported on my 2022 return at all? 

Do I really need to file a 2021 amended return?  On the original 2021 return I stated 7K deposited and 7K withdrawn.  Wouldn't filing now be more confusing and just for paperwork purposes?  Right now I don't owe anything and I'm not due anything from 2021.  

Thanks! 

[DanaB27]

Yes, if you had earnings shown in box 2a of the 2022 Form 1099-R with codes P and J then you will have to amend your 2021 tax return since those earnings are taxable on your 2021 return.

No, you don't need to enter the 2022 Form 1099-R with codes P and J on your 2022 tax return. The only exception is if you had taxes withheld then you will need to enter it on your 2022 tax return to get the withheld taxes applied to 2022. TurboTax knows to ignore the distribution amount because of the code P.

No, if you removed excess contributions before the due date then you don't need to enter anything on the "Enter Excess Contributions" screen. 

@SteveKoz 

[SteveKoz]

Sorry I have to ask one more time. Do I need to file an amended 2021 if I had losses on the Roth IRA in 2021?  We didn’t make any money that would be taxable. We lost money.   Appreciate the help. 

[DanaB27]

No, if you had a loss when you withdrew the excess contribution then you don’t need to amend your 2021 tax return since you won’t have any taxable income to report. All that TurboTax would do is add an explanation statement.

@SteveKoz 

[SteveKoz]

Thank you for all your help!