Excess Contribution to Roth IRA

[krlh184]

Here's my situation: In 2022 I over contributed to my ROTH IRA. So in 2023 I had to make a return of excess contribution and received a form 1099-R which I entered in the information for. But I am also getting this message which I don't understand:

"Indicate how much of your remaining excess contribution of $288 you want to credit toward your 2023 Roth IRA contributions."

I have two questions: 

1. How exactly are they getting a value of $288?

2. I don't want them to put any more money in my ROTH IRA for 2023 because I've already reached the limit for my ROTH IRA contributions for that year. But then when I enter 0 it gives me this message:

"IRA Contributions Worksheet: Line 26 - Taxpayer's excess Roth IRA contribution credit should be equal to $288.00, the Roth IRA contribution credit from Form 5329, Part IV."

 Is this a problem? Can I just ignore this message and put 0 anyways? 

[DanaB27]

You removed the 2022 excess contribution before the due date and therefore do not have an excess contribution. Please make sure that you do not have an excess contribution from prior years entered:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Enter Excess Contributions" screen delete the amount.

You might want to check your 2022 return, you should not have the 6% penalty calculated on Form 5329 part IV.

If you have the penalty calculated then please amend your 2022 tax return and make sure you enter the excess contribution as withdrawn on the penalty screen:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Continue until the penalty screen and enter the excess contribution amount withdrawn.

Your 2023 Form 1099-R should have codes P and J for the withdrawal of  the 2022 excess contribution plus earnings. This Form 1099-R will have to be entered on your 2022 tax return.

1. Click on the "Search" on the top right and type “1099-R” 
2. Click on “Jump to 1099-R”
3. Answer "Yes" to "Did you get a 1099-R in 2023?"
4. Enter Form 1099-R and click "Continue"
5. On the "Which year on Form 1099-R" screen say that this is a 2023 Form 1099-R.
6. Click "Continue" after all 1099-R are entered and answer all the questions.
7. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2021" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.

[krlh184]

So I deleted the amount for "Enter Excess Contributions" like you said, and that took care of the excess contribution for my 2023 tax return. But for your next two parts:

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You might want to check your 2022 return, you should not have the 6% penalty calculated on Form 5329 part IV.

If you have the penalty calculated then please amend your 2022 tax return and make sure you enter the excess contribution as withdrawn on the penalty screen:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Continue until the penalty screen and enter the excess contribution amount withdrawn.

---

I don't think I even have a Form 5329 for my 2022 tax return. Also on the penalty screen it says "Your Excess Roth IRA Contributions for Prior Years" so shouldn't it go on my 2023 tax return, not my 2022 tax return? 

Your 2023 Form 1099-R should have codes P and J for the withdrawal of  the 2022 excess contribution plus earnings. This Form 1099-R will have to be entered on your 2022 tax return.

1. Click on the "Search" on the top right and type “1099-R” 
2. Click on “Jump to 1099-R”
3. Answer "Yes" to "Did you get a 1099-R in 2023?"
4. Enter Form 1099-R and click "Continue"
5. On the "Which year on Form 1099-R" screen say that this is a 2023 Form 1099-R.
6. Click "Continue" after all 1099-R are entered and answer all the questions.
7. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2021" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.

---

Again, shouldn't this be entered for my 2023 tax return instead of my 2022 tax return, because I received my Form 1099-R in 2023? When I try to amend my 2022 tax return it asks "Did you get a 1099-R in 2022?" which isn't true, I got it in 2023. There is no option to answer "Yes" to "Did you get a 1099-R in 2023?" on my 2022 tax return. 

[DanaB27]

If you do not have the Form 5329 include on your 2022 tax return then you didn't not have a 6% penalty calculated and are good.

Generally, if you did not remove the excess contribution plus earnings by the due date then you would have to pay the 6% penalty for each year the excess remained in he account. But you removed the excess plus earnings in time and therefore you do not have to pay the 6% penalty.

The earnings from an 2022 excess contribution have to be reported on the 2022 tax return. Code P on the 2023 Form 1099-R indicates that you have to report the earnings on the 2022 tax return.

You will say yes to "Did you get a 1099-R in 2022?"  even if you didn't get it until 2023. Then you are able to enter the 2023 Form 1099-R with codes P and J.

[krlh184]

"The earnings from an 2022 excess contribution have to be reported on the 2022 tax return. Code P on the 2023 Form 1099-R indicates that you have to report the earnings on the 2022 tax return."

I actually don't have a code P on my 2023 Form 1099-R. In my distribution code box, it says 8J. So do these instructions this still apply to me?

[DanaB27]

No, if your 2023 Form 1099-R shows codes 8 and J then you will enter it on your 2023 return.

When you remove a 2022 excess contribution made in 2022 plus earnings in 2023 then you should get a 2023 Form 1099-R with code P and J. The earnings are taxable in 2022.

When you remove a 2022 excess contribution made in 2023 plus earnings in 2023 then you should get a 2023 Form 1099-R with code 8 and J. The earnings are taxable in 2023.

[krlh184]

"No, if your 2023 Form 1099-R shows codes 8 and J then you will enter it on your 2023 return."

Okay, so in that case I have entered in my excess contributions for prior years on my 2023 return but I have the same questions as before. It keeps on giving me this message:

"Indicate how much of your remaining excess contribution of $288 you want to credit toward your 2023 Roth IRA contributions."

1. How exactly are they getting a value of $288?

2. I don't want them to put any more money in my ROTH IRA for 2023 because I've already reached the limit for my ROTH IRA contributions for that year. But then when I enter 0 it gives me this message:

"IRA Contributions Worksheet: Line 26 - Taxpayer's excess Roth IRA contribution credit should be equal to $288.00, the Roth IRA contribution credit from Form 5329, Part IV."

 Is this a problem? Can I just ignore this message and put 0 anyways? 

[DanaB27]

You removed the 2022 excess contribution before the due date and therefore do not have an excess contribution. Please make sure that you do not have an excess contribution from prior years entered:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Enter Excess Contributions" screen delete the amount.

When you follow the steps above then you should not get "Indicate how much of your remaining excess contribution of $288 you want to credit toward your 2023 Roth IRA contributions." question.

To clarify, you entered your Roth IRA contribution for 2023 in the IRA contribution section?

[krlh184]

"When you follow the steps above then you should not get "Indicate how much of your remaining excess contribution of $288 you want to credit toward your 2023 Roth IRA contributions." question."

I was confused because I thought I would still have to enter the amount I initially overcontributed. So when I get to this part:

"Your Excess Roth IRA Contributions for Prior Years"

You're saying it's okay for me to put 0? When I put 0 the next question turns into:

"Indicate how much of your remaining excess contribution of $0 you want to credit toward your 2023 Roth IRA contributions."

Which I'm assuming is what we want.

"To clarify, you entered your Roth IRA contribution for 2023 in the IRA contribution section?"

Yes, I correctly entered my Roth IRA contribution for 2023 in the IRA contribution section. 

[DanaB27]

Yes, you delete the entry for "Your Excess Roth IRA Contributions for Prior Years".