Backdoor Roth mistake 1099-R help

Yes, you do not have to pay the 6% excess contribution penalty when you withdraw the excess contribution plus earnings by the due date. When you enter the Roth IRA contribution you will enter that you withdrew the excess contribution on the penalty screen then TurboTax will not calculate the 6% penalty.

 

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"

 

 

To confirm, you made the contribution in 2021 and withdrew the excess plus earnings in 2021 since you received Form 1099-R from Vanguard for this transaction. You will enter the form as shown on the form (use code shown in box 7 on the form):

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

 

 

Yes, you can make a nondeductible contribution for 2021 to your traditional IRA until April 18th, 2022. And then convert the amount in 2022 (the conversion will be on your 2022 tax return). You might want to make the contributions for 2021 and 2022 at the same time and then immediately convert both for an easier process.

 

 

To enter your nondeductible contribution on your 2021 return:

 

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contributions before this tax year.
9. If you had a basis in the Traditional IRA before then enter the amount.
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a screen saying $0 is deductible).

 

You will have a basis on line 14 Form 8606 to carry over to 2022. You will enter this basis in your 2022 tax return when you enter your contribution for 2022 (steps 8 and 9) or you can enter it when you enter your 1099-R during the follow-up interview.

 

 

 

 

 

Thanks so much for the detailed answer! 

 

The code that was on the 1099r for box 7 is 2. Early Distribution (expect Roth IRA). 

 

When I enter this code, my refund amount goes down substantially so I think it's calculating that I owe a penalty? Am I doing something wrong? 

To confirm, you received a 1099-R with code 2 in box 7 for the withdrawal of Roth excess contributions plus earnings? If you made an excess Roth contribution in 2021 and withdrew it in 2021 you should have codes J and 8 in box 7. You might want to check with your financial institute.

Yes box 7 had code 2 and nothing else. I'll check in with Vanguard. Thank you!!