2022 Excess Roth Contribution

[rand90210]

In 2022, I do not qualify to contribute to a Roth IRA due to income.  I made a $896 Roth IRA contribution early in 2022 and did an early distribution of this excess contribution in Jan 2023.  Since I reversed it in 2023, I did not get a 1099-R yet (assume it will come for 2023 taxes).

How exactly do I list the $896 contribution and reversal on my 2022 taxes?

[DanaB27]

During the IRA contribution interview, you will enter the contribution amount (ignore losses and earnings here) as removed on the penalty screen:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “Roth IRA”
6. Enter the Roth IRA contribution
7. Continue until the penalty screen and enter the excess contribution amount withdrawn.

You will get a 2023 Form 1099-R  in 2024 with codes P and J for the withdrawal of excess contributions and earnings. This 1099-R will have to be included on your 2022 tax return and you have two options:  

• You can wait until you receive the 2023 Form 1099-R in 2024 and amend your 2022 return or
• You can report it now in your 2022 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2023 Form 1099-R into the 2023 tax return since the withholdings are reported in the year that the tax was withheld. The 2023 code P will not do anything to the 2023 tax return but the withholdings will be applied to 2023.

To create a Form 1099-R in your 2022 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2022?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter J and P
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2023 Form 1099-R.
11. Click "Continue" after all 1099-R are entered and answer all the questions.
12. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" if you are over 59 1/2 (if you are under 59 1/2 and removed the excess after December 29, 2022, then enter it next to "Corrective Distributions made on or after December 31, 2022")

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2021" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.

[rand90210]

Thank you so much for this... very helpful.  I'm creating the 1099-R in Turbo Tax, but just noticed something odd in the distribution.

I over-contributed $832 in 2022 and reversed the full amount $832 in 2023.  When I reviewed the broker's distribution it was for $829.92 or $2.08 short.  When I called they said the deduction of $2.08 is for NIA.

As construct the 1099-R in Turbo Tax, I assume line 1 will be the $829.92.  Which line of the 1099-R would the $2.08 be listed for NIA?

[DanaB27]

Please follow these steps since you had a loss instead of earnings:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2022?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution minus loss) of $829.92
7. Box 2a enter $0
8. Box 7 enter J and P
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2023 Form 1099-R.

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2021" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.

You cannot claim the loss of $2.08 anywhere.