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jcw88
New Member

Addressing excess Roth contributions

In our 2022 tax return, our Form 8606 contained an error: we reported non-deductible Traditional IRA contributions that were actually Roth IRA contributions. We worked with an independent tax preparer to amend that year's return. In the process, he found that my wife's Roth IRA contributions for that year ended up exceeding her limit by $724. Our amended return for 2022 corrects the Form 8606 error and includes a Form 5329 noting the excess Roth IRA contribution and an additional tax of $43 (which we have paid). Last November, we withdrew the $724 in excess contributions from my wife's Roth IRA at Vanguard; the money flowed into my wife's checking account. Vanguard sent us no Form 1099 for 2023, and when my wife logs into her Vanguard account, she sees a message saying she is owed no tax forms for 2023.

 

I have a few questions:

Does our withdrawal of the $724 in excess 2022 Roth IRA contributions need to be reflected anywhere in our 2023 return? If so, where and how?

 

Also: when we entered the $724 in excess 2022 Roth IRA contributions in TurboTax while preparing our 2023 return, the software reduced our federal refund estimate by $43—presumably because it assumes we still owe the additional tax on 2022's excess Roth IRA contributions. Is there a way we can indicate that we have already paid this additional tax? Thank you!

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1 Reply
DanaB27
Employee Tax Expert

Addressing excess Roth contributions

You need to check with your financial institution, they are required to issue a 2023 Form 1099-R for the Roth IRA distribution. Since the distribution happened in November 2023 you should have requested a regular distribution of $724. 

 

You will need the 2023 Form 1099-R to enter the distribution and this resolve the excess contribution from 2022:

 

  1. Login to your TurboTax Account 
  2. Click on "Search" on the top and type “1099-R” 
  3. Click on “Jump to 1099-R” and enter all your 1099-Rs
  4. Click "Continue" on the "Review your 1099-R info" screen after you entered all you Form 1099-R
  5. Answer "Owned Any Roth IRA for Five Years?" screen
  6. Continue through the questions and make sure you enter the net contributions prior to 2023 (include the excess contribution amount here) on the "Enter Prior Year Roth IRA Contributions" screen

 

After entering the distribution, TurboTax will create Form 5329, which will show the excess contribution as removed and therefore TurboTax will no longer calculate the 6% penalty of $43.

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