Return ROTH Contribution Reporting

[SLYKTAX]

Need help with Roth IRA contribution withdrawal on 2020 tax return.

I am filing a joint return with my wife. Due to my retirement on 12/2020 receiving excess sick time and vacation pay, I can no longer conn tribute  to ROTH.  The trouble is my wife and I have already contributed $7,000 each for 2020 and I had done $7000 for 2021 this year.   I just had Schwab remove all the contribution instead and waiting for the # to report.  I was told my 2021 will be reported next year.

Now I am trying to revise my tax return, here is my questions on TT Question page:

1. Traditional IRA &  ROTH IRA – Select the kind of IRAs you own or will contribute to for 2020

Since we have already removed or withdrew the contributions, do you think we have to check ROTH IRA Check Box?

[macuser_22]

No.  Uncheck it and remove any contribution entered.

[SLYKTAX]

So, once I have my Roth contribution return, I just treat it as I never contributed to it at all instead of reporting I contributed and then removed, right?  The only thing I need to do is reporting on 1040 line 4a is the total return with profits or loss and Line 4b the profit or loss, correct?

[macuser_22 · Accepted solution]

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@SLYKTAX wrote:

So, once I have my Roth contribution return, I just treat it as I never contributed to it at all instead of reporting I contributed and then removed, right?  The only thing I need to do is reporting on 1040 line 4a is the total return with profits or loss and Line 4b the profit or loss, correct?

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Right.  Only the earnings that are shown in box 2a on the 1099-R for the return of contribution is taxable.   Remove the contribution so the Roth tracking will not show it or if you got the savers credit for it.

A Roth IRA contribution does not actually go on a tax return, but you can enter it anyway.

1) Tell you if your income qualifies you for a contribution and warn you if it does not.
2) Check if your income exceeds the limit to contribute to a Roth.
3) Track your contribution year-to-year if you use TurboTax every year.
4) Add the Retirement Savers Credit if you qualify.

[SLYKTAX]

Thank you Sir.  Thanks for your guidance.

[SLYKTAX]

I have the 2020 ROTH contribution return with gain.  Since I won't be getting a 1099-R until January or February next year.  I am now creating a substitute 1099-R for my 2020 tax return.   I am 70, so what is the code for the box  7?   I had a guy from Schwab said PJ.  Doesn't look like it.  P is Return of contribution taxable in 2019 - but mine is taxable 2020.  And J is early distribution which I believe is for those under 59 1/2 and subject to 6% penalty.  Please advise.

[SLYKTAX]

Continue on last question: My wife contributed to her 2020 ROTH was also returned. $5,000 contribution  was made in 2020 and $2000 was in 2/1/2021. Schwab said the earning for $5000 contribution is to be reported in 2020 Tax Return.   It takes days for Schwab to respond to a question. Another guy I talked to didn't understand the split. 

My question is : Assuming the total earing is $700.  That means the Total Return Distribution with gain made this year is $7,700.  I split the earing by  proportioning.  That is earning for 2020 & 2021 are  $500 and $200 respectively.

Then in her substitute  2020 1099-R  :  Is Box 1, Gross distribution $7,700 or $5,500 or $5,700 ?  As I believe Box 2  is $500 as $200 will be for 2021 Return.  Please advise.

[macuser_22]

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@SLYKTAX wrote:

I have the 2020 ROTH contribution return with gain.  Since I won't be getting a 1099-R until January or February next year.  I am now creating a substitute 1099-R for my 2020 tax return.   I am 70, so what is the code for the box  7?   I had a guy from Schwab said PJ.  Doesn't look like it.  P is Return of contribution taxable in 2019 - but mine is taxable 2020.  And J is early distribution which I believe is for those under 59 1/2 and subject to 6% penalty.  Please advise.

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PJ is correct.   The year advances by 1 every year so for a 2021 1099-R P means taxable in 2020.  J is necessary because it is a Roth  - without the J you would be reporting a 401(k) excess.

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 2021 1099-R on your 2020 tax return to avoid having to amend in 2021.

Enter as a regular 1099-R not a substitute (you have not received an incorrect 1099-R to substitute for).

[macuser_22 · Accepted solution]

If you do not know the exact amounts that they will put in box 1 and 2a then just wait for the real 1099-R or you will have to amend 2020 anyway.

[SLYKTAX]

How about this question for my wife?

Continue on last question: My wife also contributed to her 2020 ROTH was also returned. $5,000 contribution  was made in 2020 and $2000 was in 2/1/2021. Schwab said the earning for $5000 contribution is to be reported in 2020 Tax Return.   It takes days for Schwab to respond to a question. Another guy I talked to didn't understand the split. 

My question is : Assuming the total earing is $700.  That means the Total Return Distribution with gain made this year is $7,700.  I split the earing by  proportioning.  That is earning for 2020 & 2021 are  $500 and $200 respectively.

Then in her substitute  2020 1099-R  :  Is Box 1, Gross distribution $7,700 or $5,500 or $5,700 ?  As I believe Box 2  is $500 as $200 will be for 2021 Return.  The Box 7 code is also PJ, correct? Please advise.

[macuser_22]

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@SLYKTAX wrote:

How about this question for my wife?

Continue on last question: My wife also contributed to her 2020 ROTH was also returned. $5,000 contribution  was made in 2020 and $2000 was in 2/1/2021. Schwab said the earning for $5000 contribution is to be reported in 2020 Tax Return.   It takes days for Schwab to respond to a question. Another guy I talked to didn't understand the split. 

My question is : Assuming the total earing is $700.  That means the Total Return Distribution with gain made this year is $7,700.  I split the earing by  proportioning.  That is earning for 2020 & 2021 are  $500 and $200 respectively.

Then in her substitute  2020 1099-R  :  Is Box 1, Gross distribution $7,700 or $5,500 or $5,700 ?  As I believe Box 2  is $500 as $200 will be for 2021 Return.  The Box 7 code is also PJ, correct? Please advise.

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It depends if the contribution made in 2021 was *for* 2020 or for 2021.     If for 2020 then they are both  2020 contributions taxable in 2020, but if the 2021 contribution  was *for* 2021 and returned in 2021 then the 1099-R should have a code 8J and will be taxable in 2021 on your 2021 return next year.

[SLYKTAX]

Follow up with your answer: Her  2/1/ 2021 contribution of $2,000 was for 2020 ROTH as she only contributed $5,000 in 2020.  Schwab said the earning from the $2,000 should goes to 2021 Tax Return.  So I am trying to get the correct number to put in the 2020 1099-R. 

Assuming the total earning from the $7,000 is $700.  That means the Total Return Distribution with gain made this year is $7,700.  I split the earning by  proportion.  That is earning for 2020 & 2021 are  $500 and $200 respectively.

Then on her   2020 1099-R  :  Is Box 1, Gross distribution $7,700 or $5,500 or $5,700 ?  As I believe Box 2  is $500 as $200 will be for 2021 Return.  What is the Code in Box 7, PJ too? Please advise.