Excess Contribution to Roth IRA

[criffith]

I know this topic has been covered but I need some clarification.   I made an excess contribution to my Roth IRA in December of 2018.   In March of 2019, I removed the excess and applied it to my 2019 contributions.    I have received a 1099-R stating that I had $45.66 of taxable income earnings from this excess contribution, and Turbo Tax is telling me I need to amend my 2018 tax return, even though this was earned in 2019.    Do I claim this 1099-R on my 2019 taxes, or do I amend my 2018 taxes?   If so, do I only have to amend my gross income, and not change anything on the excess contribution?

Thanks for any clarification

[DawnC]

The earnings should be taxable in 2018.  The code in Box 7 should be a P which should tell TurboTax that it is taxable in 2018.  If you properly added the excess amount in 2018, you should not have to amend it.  If you did not add the $46 to the 2018 return, you will need to amend your 2018 tax return and add the income.    

[Edited 03/24/20 | 9:06 PM]

[dmertz]

Because the contribution for 2018 was returned in 2019, this Form 1099-R will have codes J and P indicating that the $45.66 of earnings is reportable on your 2018 tax return.  If you did not already include this $45.66 on your 2018 tax return you must amend your 2018 tax return by entering this 2019 Form 1099-R into 2018 TurboTax and indicating in the follow-up questions that it is a 2019 Form 1099-R.  The $45.66 is not reportable on your 2019 tax return.

If you were age 59½ or over at the time of the distribution in 2019, you must also indicate an Other Reason exception to the early-distribution penalty on the $45.66 indicated by the code J.  If you were under age 59½, you owe the 6%, $3 penalty calculated on 2018 Form 5329 Part I.

[criffith]

It is correct that the $45.66 was earnings, but the Box 7 shows J and P.   Does this mean it belongs as income in 2018, even though the distribution was made in 2019?

[dmertz · Accepted solution]

Yes, the $45.66 must be reported on your 2018 tax return, not on your 2019 Tax return.  That is the meaning of code P on a 2019 Form 1099-R and code P is correct under these circumstances.