2023 Excess Roth IRA Contribution

[Vicky75]

Follow up on “No, you will not get penalized for removing a little more than the excess contributions to avoid the changes in MAGI.”

So the removal of the earning from the overage of the excess (not the excess but the additional amount) will not be penalized with 10% early drawdown since i am not yet 59?  I thought any early interest earning withdraw is subject to 10% penalty.  

Thank you and appreciate your quick response.

[AmyC]

When Dana suggested taking a little extra out and then replied, I read it as you won't be penalized because you took out more than necessary vs yes, all money distributed is subject to penalty.

So, to clear the air. Dana is correct that it is a good idea to take a little extra and that is allowed.

Any interest earned that you take out is an early distribution and subject to penalties and tax.

@Vicky75 

[Martin212]

@AnnetteB6 Is there a way to check if the 1099R that we created is being accepted by TT and the return is being adjusted correctly? I entered it as recommended (I thought) but do not see a new 1099R form created within the 2023 TT software. Should it be visible there or is hidden since it is really a 2024 1099R?

[DanaB27]

You can check you Form 1040 line 4. The earnings will be listed on line 4b.

To preview Form 1040 in TurboTax Online:

1. Click on "Tax Tools" in the left menu
2. Click "Tools"
3. Click "View Tax Summary" in the Tool Center window
4. Click on "Preview my 1040" on the left

If you need to go  back to the retirement section to edit the Form 1099-R:

1. Click on the "Search" on the top right and type “1099-R” 
2. Click on “Jump to 1099-R”

@Martin212 

[Vicky75]

Need your help in completing the 1099-R forms with the following scenario:

$2,000-excess contribution made in 2023 for tax year 2023

$600-excess contribution made in Jan of 2024 for tax year 2023

$100-earning from the $2,000 contribution made in 2023

$20-earning from $600 contribution made in 2024 for tax year 2023.

1.  What amount do i report on 1099R line 1 and 2 for 2023?

2. What amount do i report on 1099R line 1 and 2 for 2024?

Thank you!

[DaveF1006]

To clarify, did you withdraw the excess contributions?

@Vicky75 

[Vicky75]

Yes, i did withdraw the excess contributions and the scenario indicated above was what happened to my case.

[DanaB27]

I would verify this with your financial institution but your 2024 Form 1099-R with code P and J should have $2,100 in box 1 and $100 in box 2a. This will have to entered on your 2023 return. 

Your 2024 Form 1099-R with code 8 and J should have $620 in box 1 and $20 in box 2a. This will be entered on your 2024 return.

@Vicky75 

[Vicky75]

Even though my 2023 excess contribution is $2,600 ($2.000 was contributing in 2023 and $600 was contributed in 2024).  You believe that the $600 should not be reported in 2023 return?  But that was part of my excess contribution for tax year 2023 though.  If i don’t report the $600 in 2023, doesn’t this mean i did not remove all my excess contribution in 2023 and will be penalized the 6% for the balance of $600?  I am confused.

Shouldn’t i report $2,700 ($2,600 excess removal plus $100 interest earned in 2023) in box 1 and $100 in box 2 for the 2023 return?  Then report $20 interest in both box 1 and box 2 in the 2024 return?  Please confirm.  Thanks.

[DanaB27]

No, you do not report $2,700 ($2,600 excess removal plus $100 interest earned in 2023) in box 1 and $100 in box 2 for the 2023 return. 

No, you do not report $20 interest in both box 1 and box 2 in the 2024 return.

You do not pay the 6% penalty since you removed the excess by the due date.

You will report it as mentioned in my previous reply but I would recommend to check with your financial institution. Most financial institutions will issue a 2024 Form 1099-R with codes 8 and J with $620 in box 1 and $20 in box 2  if you made the Roth IRA contribution in 2024 for 2023 and removed it in 2024. And this will have to be reported on your 2024 return. 

@Vicky75 

[Vicky75]

Thank you so much!!!  I called my financial institution and confirmed your advices were correct.

when i was trying to e-file my return, it stated that i can not e-file due to: for California, “Return with federal form 4852 (substitute W-2) are not eligible for electronic filing.  The rule are set by the Franchise Tax Board”.

Can i still submit the federal return via e-file and mail in the state return?

[DawnC]

You won't be able to e-file the federal, either.   See Form 4852.   It won't hurt anything to try and e-file it, but there is a 99% chance the federal would be rejected as well.  This is an IRS regulation, not a TurboTax rule.  

Returns including Form 4852 can't be e-filed because of IRS regulations.

[Vicky75]

I don’t have a substitute W-2, not sure why form 4852 was created.  I have excess roth ira contributed in 2023 and removed in 2024.  Do i need to complete the 4852 form?

When Turbotax say, tell us which 1099-r you have, i check the box that says “Form 1099-R, withdrawal of money from 401(k) retirement plans, pensions, IRAs, etc.

Do I check the box that say “i need to prepare a substitute 1099-R.”  Checking or not checking this box determine if Turbotax will generate the form 4852?

[DanaB27]

No, you do not check “I need to prepare a substitute 1099-R.”  

@Vicky75 

[Vicky75]

Thank you for the clarification!!!  I truly appreciate you helps!!!