Do I have to treat my 2017 excess Roth IRA contribution as a credit toward my 2018 contribution?

[lalvidrez]

I made an excess contribution of $500 to my Roth IRA in 2017. The money was returned to me after I had filed 2017 taxes. I received a 2018 1099-R with distribution codes J&P. TurboTax is requiring me to treat this as a credit toward my 2018 Roth IRA contribution, on Form 5329-S, even though the money is no longer in my Roth IRA account. Effectively, I am able to contribute only $6000 in 2018 instead of the $6500 allowed (I am 54 years old.) Is this really the only allowable option?

[macuser_22 · Accepted solution]

A 1099-R with code JP must be reported on an amended 2017 tax return, not 2018 - it is taxable in 2017 - the year that the contribution was made.

On the 2018 return in the Roth IRA contributions interview you should say that the excess is zero.  Or if using the desktop version switch to the forms mode and on the "IRA Info Worksheet" line 10 "2017 excess contributions", if the excess is there, delete it.

[fanfare]

If you took the excess out, you're square and you can put the full amount allowed into your Roth this year.

did you enter both codes J + P into turbotax ?

Even if you did not yet take the excess out, you would still be allowed that, but a penalty would apply.