Need help completing my 2023 taxes (I filed the extension and now they are due Oct 15) with the following scenario:
$2,537-excess contribution made on 2/9/2024 for tax year 2023 (year prior contribution to Roth IRA)
$67.78-earning from $2537 excess contribution made in 2024 for tax year 2023.
Removed both $2537 and $67.78 in 2024 before Oct 15 deadline from Roth IRA.
Questions-
1) Do I fill out form 5329 for 2023 tax year or 2024 tax year and how so? I believe I will only owe taxes on the $67.78 earnings but not the 10% early withdrawal penalty since I removed before the extended Oct 15 deadline for the 2023 taxes.
2) Do I fill out form 1099R only for 2024 tax year or do I need to report for 2024 tax year?
3) Is there anything else that needs to be reported for tax purposes?
I want to be able to avoid completing an amended tax return for 2023.
Thank you!
The allocable earning belong on your 2023 tax return.
If you don't want to have to amend, you should include that amount in your original 1040 filing Line 4b.
Nothing goes on your 2024 return, unless the custodian withheld income tax (yes it has happened to some people).
Search the forum for how to use 1099-R Code PJ to put that amount on your 2023 tax return.
There is no penalty so you don't need the form 5329.
I read on turbotax before the following which is why I am confused:
"If you made the contribution to your Roth IRA in 2024 (between January 1, 2024 and the 2023 filing deadline without extensions) but you designated it as a 2023 contribution and you withdrew it in 2024, the Form 1099-R you get will be for 2024. Include the Form 1099-R on your 2024 return. Your Form 1099-R will have code 8 and a code J in box 7."
Dates of everything occurred in 2024-
2/9/24- $6,500 contribution last year for roth ira 2023
3/31/24 and 6/30/24- Interest paid
8/29/24- withdrawal of excess contribution last year ($2537 removed)
8/29/24- excess earnings withdrawal
The post you quoted above is not correct.
Yes, misinformation on the forum causes confusion.
THe 1099-R you will get in the future - Feb 2025 - will be a 2024 1099-R with Code PJ which means prior which means 2023.
TurboTax 2024 will instruct you to amend.
The quoted paragraph I posted was not in a forum but in instructions on TurboTax when I first discovered the excess contribution. That is why I am confused on how to proceed.
I have not received the 1099-R form since everything occurred from Feb, 2024-this past month but I believe I should be receiving a 1099-R form in Jan, 2025.
Did you decide what to do?
Enter a made-up 1099-R with code PJ
put the earnings $68 in box 1 and box 2a
don't check any boxes
don't check the IRA/SEP/SIMPLE box because you have a Roth IRA.
The trick is to tell TurboTax you have a 2024 1099-R
It should ask you that in the Step by Step process.
This should give you the earnings in line 4b
I appreciate all of your help and responses.
I guess I am just confused on why the 1099-R needs to be placed in the taxes for 2023 when all of this occurred only in 2024 and none occurred in 2023.
See most recent IRS Pub 590A for the IRS documentation, which , unfortunately, contradicts the interpretation of our guru @dmertz.
Although code PJ is the expected document, @dmertz recently informs us that
some custodians may code 8J, which more closely matches your intuition.
If you can call Monday, maybe the custodian can tell you what they will do.
Hi again,
I did not end up doing what you advised and just waited to receive my 2024 1099-R form. They did use distribution codes of J and P. They placed $2604.78 in the gross distribution (1) but put "$0.00" in 2a taxable amount and checked marked "taxable amount not determined."
I am in the process of amending my 2023 taxes.
Questions-
1) I entered the 2024 1099-R form as it was sent in my amended 2023 taxes but how do I report the $67.78 excess earnings withdrawn to be able to pay taxes? Do I state it is a "substitute 1099-R form" and change the taxable amount to $67.78 and then write in the explanation that they did not add it in or is there another form I need to use to report these earnings?
2) Should this affect both my federal and state taxes for the earnings? I work and live in Maryland therefore my taxes are MD but this RothIRA bank is only in Florida where I am originally from and the state on it says FL and the address is my parents' Florida address. Will this affect anything?
3) Do I need to report the 2024 1099-R form on my 2024 taxes still?
Sorry I am just stressing over all this and just want this to finally be over.
You're working with a bank. Banks are notorious for giving you an incorrect 1099-R.
The taxable amount is determined. (as discussed previously ).
Uncheck that box and enter the $68 in 2a, which is what you would have done last year if you followed my advice.
On more question, I was reading a different thread and someone mentioned the amount of "excess earnings withdrawal" then goes into your "modified adjusted gross income" thus affecting how much I could contribute again to my 2023 roth iRA even though this all took place in 2024, including the excess earnings interest made. Is this true? Because then that means I still overcontributed to my rothIRA even though I took all the precautions and did the reduced contribution limit calculation.
Thank you for any and all advise and help.
It is now saying that I overcontributed still for my 2023 RothIRA in 2023 since they are counting the interest earned in 2024 of $67.78 to my 2023 modified adjusted gross income. Is this correct?
well your excess is $68.
You can remove that now before April 15th, as a straight distribution of $68. IRS will waive any penalty after you explain what happened on your 2024 tax return with Form 5329 attached.
If you are stressed you should file for an extension, that gives you until Oct 15th to take out the $68.. It is not taxable since it is your own money.
Consult your custodian to obtain the correct removal form for distribution request..
I am sorry and hope I am making sense but I am very confused right now.
I contributed the full $6,500 on 2/9/24 for prior year 2023.
I then discovered I had overcontributed to my RothIRA for 2023 of $2537.00 based on my modified adjusted gross income that was made in 2023.
I then had the bank (which took them 6 months of me asking) to withdraw both the excess contribution of $2537.00 and the excess earnings withdrawal of $67.78 (that was all accrued only from Feb-Sept, 2024- none of the interest was made in 2023 since all of this took place in 2024).
If I add the $67.78 as earned in 2023 on the 2a box of 2024 1099-R form on my 2023 taxes, it is showing as if that $67.78 was earned in 2023 which it was not. It was interest solely from 2024 (Feb-Sept, 2024).
Can I instead report the 2024 1099-R form as it is listed without any of the taxable amount in 2a on my amended 2023 taxes. Then add the correct $67.78 somewhere on my 2024 taxes to pay the taxes due on that for 2024 since none of that was made in 2023?
Because otherwise this $67.78 that was made in 2024 is now again affecting my 2023 taxes. I would not be able to fix this with just an extension since the extension would only be for 2024. I did not contribute anything to my rothIRA for 2024 to avoid this mistake again.
I really appreciate you taking the time to read my questions and help me because I am in need of help with this to resolve this.
@DanaB27 any help with this as well? I was reading your responses from other posts too.
You are confused because you are confusing actions taken in one year but reportable in a diffrent tax year.
You have until TaxDay 2025, including extensions if ask for that. to handle this 2023 issue on your 2024 tax return.
request an extension and put it away for three days, Come back then and hopefully it should be clear to you what to do.
I just asked for extension for 2024 taxes and have not yet filed my amended 2023 taxes.
I am confused on your instructions on what to do. For the straight distribution of $68, what do you mean?
Sorry, I am trying my best to understand.
If you amend 2023 correctly, the $68 should show up on Form 5329 line 23.
I was wrong, you can't request a waiver of that penalty of 68 x .06 = $4.08
As fanfare stated the 2024 Form 1099-R with code P and J belongs on your 2023 return. Yes, earnings will increase you MAGI and therefore can create a new excess contribution.
As fanfare stated you will have to pay the 6% on your 2023 if you have a new excess contribution because of the earnings. You do not have to pay the 6% penalty on your 2024 return if you can apply the excess as a 2024 contribution.
On your 2024 return:
If you cannot apply the excess as 2024 contribution then you have to pay the 6% on your 2024 return. You will take a regular distribution without the earnings to remove this new excess. You will get a 2025 Form 1099-R with code J (if you are under 59 1/2) and this will resolve the excess contribution on your 2025 return.
Did you ever clarify with your custodian why they entered $0 in box 2a as earnings when you think you have earnings of $67.78? Technically, if it states you had $0 earnings in box 2a then you would not need to amend the 2023 return since the 2024 Form 1099-R with code PJ with $0 in box 2a shows you had no earnings to report. You should verify with your custodian.
I don't think he's confused at all. I just think he doesn't know what to do.
I have the exact same situation and don't know what to do either. Please try to explain 😉
My (ex) custodian sent 2 1099R forms for 2024, one coded P and one coded X. They put in Trad IRA contributions (from my taxable assets) for 2023 ( 7500) and 2024 (8000) in Feb. 2024. I wasn't eligible for either, thus 2 excess contributions. They were removed from the IRAs and the forms say nothing is taxable.
Questions:
1- They were in there for a few wks. I imagine they both incurred some interest, though I dont know. Wouldn't that be taxable income? If they didnt include can I assume there was none and that maybe it even lost money?
2-I have no taxable income to report, as of now and my taxes are due soon. Custodian didnt report any. if there was any though, like his, the 2024 would go on which form? And pertinent to what he is asking, where would the interest from the 2023 go? it was earned in 2024 so it seems it must go on the 2024 return. So why would the 2023 need to be amended? There was no extra income earned. And the IRA never happened so no tax consequences on the principal.
So I dont understand ( and I dont think he does either) why the 2023 needs to be amended ? I understand our cases are slightly different. it would help to speak in language as simple as possible because so much stress accompanies this. I want to avoid an extension if possible. and when you say 'no penalties if you explain what happened" to IRS- you mean indicate it was a simple mistake? Seems if you were doing it intentionally you would never report you had excess/ disallowed contributions.
I was told that "
If you accidentally overcontributed to a Roth IRA, you need to withdraw the excess amount including any earnings before your tax filing deadline to avoid a 6% penalty each year the excess remains in the account.
he did withdraw before 4/15/25. So why would he have to pay the penalty? Or am I missing something? I over contributed to a Trad IRA. But the custodian left the earnings in there. is there a penalty if I remove that before the 15th? thanks.
I wrote the above before you indicated the penalty is intact. sorry . and I understand that if he has earnings he has to amend the 2023 return.
Mine also says 0 in the earnings box but I cant understand how there were no earnings in the maybe 3-4 wks it was in there. I didn't ask explicitly for them to withdraw associated earnings because that seemed so obvious. But the person above says he did take out the 68.00 so not clear why it said 0.
. I have now asked my ex-custodian what the earnings were as I have no other way of knowing and if I'm right have a few days to withdraw those earnings as a distribution and avoid the 6% penalty from what I have read. and this is true even if I get an extension, which I likely will.
If there were no earnings but decrease in value what happens then? They withdrew the original amount we put in. many thanks for your expertise. I;m new to dealing with my own returns and new to Intuit so pls excuse any breaches of etiquette. I just realized my problem days before tax day.