Excess 2019 contribution to Roth IRA

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I contributed $6000 to my Roth IRA in Jan 2019. In doing my 2019 taxes last week, Turbo Tax informed me that my income was too high and only $500 of the $6000 was allowed ($5,500 excess contribution). I contacted Vanguard and had the 2019 excess contribution returned along with the earnings (approx $2,200).

How do I report these $2,200 in earnings from the excess contribution? Do I just create a dummy 1099-R? It's not clear to me in Turbo Tax how I should go about doing this. Thanks!

DianeC958

Alumni - Intuit

Yes, you can report the as a substitute 1099-R for 2019 the earnings. This amount is fully taxable on your return and you will have a 10% penalty for early withdrawal.

The Code you want to use for Box 7 is code 8.

You will receive a 1099-R in 2021 for this distribution since it occurred in 2020. You do not need to report the information on your 2020 tax return since you have already reported it on your 2019 return.

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BluuDogg79Author

Level 2

So now that I create a substitute 1099-R and report these earnings on excess contributions, this bumps up my income and Turbo Tax is telling me that I'm not allowed any Roth IRA contribution at all! So now do I have to go back to Vanguard and request a return of the remaining $500? I feel like Turbo Tax did a very poor job explaining this situation and what I needed to do. Very frustrating.

BluuDogg79Author

Level 2

Again, no one has addressed this issue. Turbo Tax originally said I could only contribute $500 to my Roth IRA, thus it said I had an excess distribution of $5,500.

So I withdraw the $5,500 and earnings from my Roth IRA and report those earnings on a self-created 1099-R. Now Turbo Tax is saying I can't contribute anything to my Roth IRA! I guess I have to go back and withdraw the remaining $500 from my Roth IRA. Do you understand the circular nature of this?

This was not presented well in Turbo Tax and I'm still leary that I'm even handling this correctly.