Excess contribution made to IRA in 2022, withdrawn before deadline in 2023 March. 1099-R has only code J.

[u0d4n7a0p]

I opened my first and to date only ROTH IRA account in March 2022 and deposited $51. The custodian gave me $100 bonus. I didn't invest any of this anywhere and in March 2023 I withdrew $154 as I figured that I was not eligible to make any ROTH IRA contributions. 

I did not report excess contribution/withdrawal/earning from excess in 2022 returns. I received 1099-R for 2023 year  with only code J in box 7 and showing distribution of $154 in box 1 and taxable amount not determined ticked.  All other boxes are empty.  I did not do anything about it in my 2023 returns.

I am now amending my 2022 returns.  I am able to get 5329 to show $103 as earning from $51 contributed. It doesn't show any penalty because I withdrew it before the deadline.  1040 4b shows interest income of $103 and $154 shown in 4a. Turbo tax isn't showing any form 8086

What should I do for my 2023 returns. Just ignore 1099? @DanaB27 

[dmertz]

The code-J 2023 Form 1099-R indicates that you received an ordinary distribution, not a return of contribution.  As such, only the $51 contribution is reportable on your 2022 tax return and, given that it was an excess contribution, is subject to a 6%, $3 penalty on your 2022 tax return, determined on Part IV of your 2022 Form 5329.  The $51 carries forward to 2023 as an excess and as your basis in Roth IRA contributions.  The 2023 Form 1099-R distribution is not reportable anywhere on your 2022 tax return.

In 2023 TurboTax, make sure on that the $51 appears on the IRA Information worksheet as an excess carried forward from 2022 and as contribution basis carried forward from 2022.   You report the regular $154 distribution by entering the code-J 2023 Form 1099-R into 2023 TurboTax.  This distribution will appear on line 20 of your 2023 Form 5329 to be subtracted from the $51 on line 18, reducing the excess to zero.  The distribution will also appear on Part III of your 2023 Form 8606 where your $51 of contribution basis will be subtracted, resulting in $103 being subject to ordinary income tax and a 10%, $10 early-distribution penalty.

[u0d4n7a0p]

Code J is entirely custodian's fault. I withdrew it in timely fashion before April 15, 2023. Is what you are saying still the case?

[dmertz]

"Code J is entirely custodian's fault."

Presumably you had the opportunity to review the details of the transaction prior to finalizing the distribution request, so it's doubtful that the custodian made the distribution as an ordinary distribution without your approval.

If you do want to challenge the accuracy of the 2023 Form 1099-R, using 2022 TurboTax you would have to enter a substitute Form 1099-R (Form 4852) describing the error and your attempts to get the erroneous Form 1099-R corrected.  With that done, you would report the substitute Form 1099-R on your 2022 tax return as you described.  You would need to file the same substitute Form 1099-R (Form 4852) with your 2023 tax return or 2023 amendment, otherwise the IRS would determine that you failed to report the $154 of income shown on the code-J 2023 Form 1099-R.

Given that the penalties are only $13, I would just treat the distribution as an ordinary Roth IRA distribution as reported by the custodian and as I described in my post above.  It would be less effort (no Forms 4852) and essentially no chance of the IRS disagreeing with the way that you report the distribution.  The $103 of gains would end up on the 2023 tax return instead of on the 2022 tax return.  No matter what you do, both the 2022 tax return and the 2023 tax return are affected, so if both of these have already been filed, both need to be amended.