2024 Taxes still shows penalty for overfunded 2022 IRA contributions, despite being withdrawn and 1099-R with code 8J entered

[cbrough1]

I overfunded my IRA in 2022, withdrew the excess contributions and had them withhold the taxes on the earnings. This all happened within 2022, so I received a 2022 1099-R showing distribution code 8J, which I entered into TurboTax when filing my 2022 taxes.

During the course of preparing my 2024 taxes I noticed that it still has a form 5329 and on line 18 it looks like it carried forward from 2022-->2023 and then 2023-->2024 my excess contribution amount, even though it was withdrawn within the same year it was deposited.

How can I correct this?

[DanaB27 · Accepted solution]

If your 2022 return shows the 6% penalty then you will need to amend your 2022 return to remove the penalty. Please see How do I amend my federal tax return for a prior year?

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Enter the Roth IRA contribution
5. Continue until the penalty screen and enter the excess contribution amount withdrawn (ignore earnings and losses for this entry)

To remove the penalty on your 2024 return:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Enter Excess Contributions" screen delete the carried over amount

Repeat the steps above on your 2023 amended return.