Excess Roth Contribution Corrections (2019, 2020, 2021)

[kfo89]

We recently discovered that we'd made excess contributions to my Roth IRA in 2019, 2020, and 2021. We had the broker withdraw the excess contributions for 2019 and 2020 in one lump sum in January 2022 and are working on having the excess contributions (plus earnings) for 2021 removed, also in January 2022. The broker tells us that we're going to get a 1099-R in January 2023. I'm wondering how we're going to have to report these?

Will I need to amend my 2021 return to report the 2021 contributions (plus earnings) removed in January 2022 and then report the return of the 2019 and 2020 excess contributions on my 2022 return?

Will I need to go back and amend my 2020 and 2019 returns?

[DanaB27]

It depends if you had already reported the excess contribution and paid the 6% penalty on your 2020 and 2019 returns. If you did then you do not need to amend those years. If you did not then please see How to amend (change or correct) a return you've already filed.

Please be aware, that you will have to pay the 6% penalty on your 2021 tax return for the 2019 and 2020 excess contributions since the amount was not removed by December 31, 2021. 

Yes, you will report the removed 2019 and 2020 excess contributions amount on your 2022 tax return. 

Yes, you will need to report the earnings from the 2021 excess contribution on your 2021 tax return and you have two options: 

• You can wait until you receive the 1099-R  2022 in 2023 and amend your 2021 return or
• You can report it now in your 2021 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2022 1099-R into the 2022 tax return since the withholding is reported in the year that the tax was withheld. The 2022 code P will not do anything in 2022 tax return but the withholding will be applied to 2022.

To create a 1099-R in your 2021 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2021?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter P and J 
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.

[kfo89]

Many thanks @DanaB27 this is super helpful.

Regarding amending the 2019 and 2020 returns to pay the 6% penalty for each year, how do we go about doing that through the online service? I understand that we'd need to have TurboTax generate Form 5329s for each year, is that correct?

[Opus 17]

@kfo89 

Did you file your prior returns with TurboTax? If you did not, you can still use TurboTax to file amended returns for those past years, but it is more complicated.

[DawnC]

That is correct, but only if you did NOT report the excess and pay the 6% on the 2019 and 2020 returns.   If you did not report the excess for 2019 and 2020 on those returns, you do need to amend them.   TurboTax will generate Form 5329 for you when you enter the excess contributions.      

How to amend (change or correct) a return you've already filed   This links gives instructions on amending both the 2019 and 2020 tax returns.   You will be able to e-file the 2020 amendment, but not the 2019.   The ability to e-file TurboTax created amendments only started for 2020 amended returns, so the 2019 amendment will need to be mailed.   Go through the amending steps carefully as they are different for each year.