Another question about 1099-R and Roth IRA excess contributions

[lowted]

Hello, I've been reading a lot of posts about this, and I think I understand excess contributions but my specific scenario hasn't been covered and I have a few questions to fill in the gaps - hopefully the community can help me out....

I made excess Roth IRA contribution in 2023:
- Excess contributed $606
- Gains made from the excess: $158.52
- I have withdrawn the excess and the gains via an excess contribution withdrawal request from the broker (E*trade).
- I am under age 59
- I have not filed yet for 2023.
- I anticipate I will get a 1099-R for this activity next year, but I am trying to avoid amending my 2023 return.
- I am now filing my 2023 taxes and trying to figure out how to enter this in TurboTax.

Here's how, after reading some other forum posts, I am expecting to enter as a "fake?" 1099-R for the 2023 tax year:
Box 1: 764.52
Box 2a: 158.52
Box 3: 158.52
Check boxes "P" and "J"

Questions for the community:
- Am I on the right track? Do the above boxes look right?
- Do I choose "substitute 1099-R" or just choose a regular 1099-R?
- Since I don't have a form, what do I put for the Payer name, address, and Federal ID number? I don't have other tax forms to reference this info on. (The broker is E*Trade)

Thanks in advance

[philly2024]

similar question

[MarilynG1 · Accepted solution]

Yes, only the Box 2a gains amount is taxable on your 2023 return, since you are withdrawing the excess contribution prior to tax filing due date.

You don't need an entry for Box 3.  Codes P and J go in Box 7.

You can reach out to your broker for their Federal ID number.

The 1099-R is not a 'substitute' one.

You will need to indicate 'other reason' for an exception to the Early Withdrawal Penalty if you're under 59.5 and add the Earnings amount.  This is under Other Tax Situations > Additional Tax Payments > Extra Tax on Early Retirement Withdrawals.

Here's more info on Excess Roth IRA Contributions you may find helpful.

@lowted 

@philly2024 

[Victor21]

I have similar but not exact case (more complicated case) so need help.
Contributed $6000 on Oct 19, 2022
Withdrew $6000 on May 2, 2023 (when I realized I made too much income to be able to contribute to ROTH)
So the mistake I made was that I did not withdraw excess + gains, only the excess. The gains are still sitting in the account.
Q1: The 1099-R for $6000 withdrawal has code J in box 7 indicating early withdrawal no exception. Do I add P myself to indicate this was excess contribution withdrawal?
Q2: Box 2a is empty, do I compute my gains for the year 2023 on this excess contribution and enter that amount?
Q3: How do I deal with gains that are still in the ROTH. Should I withdraw them now (and deal with 1099-R from that again next year)?

[DanaB27]

Q1. No, you cannot just add code P. You made a regular distribution not a withdrawal of excess contribution plus earnings.

If you did not withdraw the earnings with the excess contribution then you will have to pay the 6% penalty for 2022. If you did not pay the 6% penalty on your 2022 tax return then you will have to amend your 2022 tax return an enter the Roth IRA contribution. Then TurboTax will calculate the penalty on Form 5329. 

" For purposes of determining excess contributions, any contribution that is withdrawn on or before the due date (including extensions) for filing your tax return for the year is treated as an amount not contributed. This treatment only applies if any earnings on the contributions are also withdrawn. The earnings are considered earned and received in the year the excess contribution was made."(Pub 590-A)

Q2. No, you will enter the 2023 Form 1099-R on your 2023 return as shown. 

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
5. Answer all the questions and make sure you enter the net contributions prior to 2023 on the "Enter Prior Year Roth IRA Contributions" screen
6. On the "Do you have any Excess Roth Contributions" answer "Yes"
7. On the "Enter Excess Contributions" screen enter the total excess contribution from 2022.

The excess contribution will be resolved in 2023 when you enter the Form 1099-R. 

Q3. You can leave the gains in the account since it is after the due date of the 2022 return.

Please see What happens if I made an excess Roth IRA contribution for additional information.

@Victor21

[hmmtmm]

@MarilynG1 @DanaB27 

I have a similar situation but in my case, after realizing that I'm not eligible to contribute to a Roth IRA, I soon after asked for the whole contribution withdrawal, and within a few days the money was returned to me. 

In 2024, I received the form 1099-R and the values are

Box 1 - Gross distribution: $5,000.00

Box 2a - Taxable amount: $0.00 

Box 7 - Distribution code: 8 J

 I have more than one value in Box 7

However, Turbotax gave me a message after I was done entering this form stating, 

 "

• Based on the 1099-R Box 7 code that you entered, it looks like you may need to pay extra taxes on this distribution.
• This most commonly happens when you take money out before you reach retirement age (or before you're supposed to). The extra tax encourages you to keep your retirement money for retirement instead of withdrawing it early.
• We’ll factor in any taxes withheld when you took it out and check for exceptions after you enter all of your 1099-Rs."

 I should not be charged taxes on this excess Roth IRA distribution which I withdrew soon after. Even Box 2a has a value of $0.00 and Box 7 has a value of "8J" 

My questions are

1. Do I need a new 1099-R with corrected values?

2. If not then where and how I can instruct turbo tax to not calculate taxes? 

Detail help with exact options in TurboTax will be appreciated.

[DanaB27]

1. No, your Form 1099-R is correct

2. You can ignore the message, since you had $0 earnings in box 2a, nothing gets added to your taxable income. You can check line 4b of Form 1040 to verify that nothing got added to your taxable income.

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