Excess Roth funded 3/3/20 (2020) - removed 3/8/21

[DanaB27]

It seems that when you entered the Form 1099-R with code PJ in your 2020 amended return created a new excess contribution because the earnings on the excess are taxable income in 2020.

On the 2020 return please make sure that you enter the $300 removed by the due date on the penalty screen. You will have to pay the 6% penalty on the new excess contribution ($110) on your 2020 tax return.

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 Continue until the penalty screen and enter the $300 excess contribution amount withdrawn

You will also have to pay the 6% penalty on your 2021 tax return since the new excess wasn’t removed by December 31, 2021.

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 enter the new excess contribution from 2020 ($110)

You can avoid the 6% penalty for 2022 by making a regular distribution (without earnings and losses) by December 31, 2022. You will get a 2022 Form 1099-R and it will go on your 2022 tax return. Since you didn’t remove this $110 excess by the due date you will have to include this amount in the net contribution amount when TurboTax asks.

1. Click on "Search" on the top and type “1099-R” 
2. Click on “Jump to 1099-R” and enter all your 1099-Rs
3. Click "Continue" on the "Review your 1099-R info" screen
4. Answer questions until the "Enter Prior Year Roth IRA Contributions" screen and enter the net contributions prior to 2022 (include the $110 new excess not removed by the due date with your other contributions).

@DPNJ

[DPNJ]

Thank you for the great details.  I will review now and advise.

Many thanks!

[DPNJ]

Tax paper is over 59 1/2 and yet box 7 is marked  code J.  Should this be exempt since taxpayer is older than 59 1/2?

Also - to confirm, taxpaper needs to withdraw another $100 (410-300) from the roth ASAP?

Thank you!

[DanaB27]

Yes, you have to withdraw the new excess of $110 ($410-300) as a regular distribution by December 31, 2022.

Yes, you will be exempt from the 10% early withdrawal penalty if you are over 59 ½. Please follow these steps:

1. Click on the "Search" on the top right and type “1099-R” 
2. Click on “Jump to 1099-R”
3. Enter your Form 1099-R
4. Click "Continue" after all 1099-R are entered and answer all the questions.
5. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings box 2a under "Another reason" if you are over 59 1/2 

@DPNJ

[DPNJ]

Thank you.  Will remove ASAP.

1099R worksheet has the box checked IF BOX 7 CODE IS 2 OR 5, CHEK IF THIS DIST. IS FROM A ROTH.  The box 7 codes are J and P.  

Should the item marked CHECK IS A QUALIFIED DIST. be checked?  Can't override it.

2020 

I did check off the OTHER reason for exclusion for age and it placed a code 12 on line 2 and shows now as not subject to tax.  Only show a 6% $25 tax on line 25.

from you: On the 2020 return please make sure that you enter the $300 removed by the due date on the penalty screen.

I can't locate this.  I tried using the search but nothin with JUMP appears - only a list of posts with the Roth topic.

If I understand correctly,  the 6% tax should only be $6.60 (6% of the $110 because that was not returned yet.  And, the same tax of $6.60 will be imposed in 2021 -correct.

Sorry to repeat, if I am, but I'm working to fix 2 separate years.  Who would have thought such a simple amount of excess MAGI could cause all this work and confusion.

Very grateful for your speedy replies - I must finish today.

[DanaB27]

No, don't make any changes to the 1099-R worksheet. If you answer the question in the interview then you won't get the 10% penalty since you are over 59 1/2.

Please try these steps to get to the IRA contribution section:

1. Click “Deductions &Credits” on the top
2. Click "I'll choose what to work on"
3. Scroll down to “Traditional and Roth IRA Contributions” and click “Start/Edit”
4. Select “Roth IRA”
5. Continue until the penalty screen and enter the $300 excess contribution amount withdrawn.

Yes, the 2020 penalty should only be $6,60 since $110 excess were not removed.

@DPNJ

[DPNJ]

Thank you. 

Just now my TT 202 application keeps shutting down!  Now what?  HELP!

[DPNJ]

I want to thank you for all your help.  Somehow I managed to reflect only $110 balance as overfunded on the 2021 return.

I'm completing the 2020 amended and it's asking for values on the NJ return -

Is this the first year of W/D - I selected yes

"Total of IRA contributions previously taxed"  What is entered?     Does this refer to the value of all contributions for all IRAs or tax paid on withdrawals.  This amended return is to correct for an error.  Not planning to withdraw from this for years.

Value of all IRAs on 12/31   - does not state a year.  Is is as of 12/31/20?

IRA contributions made between 1/1and 4/15  - does not state a year.  Is is as of 12/31/20?

Thanks Again!

[DanaB27]

Yes, all contributions that were after-tax.

Yes, as of 12/31/2020 since you are working on your 2020 return.

Contributions made between 1/1/2021 and 4/15/2021 since you are working on your 2020 return.

@DPNJ

[DPNJ]

Hello DanaB27,

Thank you for all your guidance.  This was not as seamless as I thought should be.  TT has not been a good experience this go-around.  I've been a user for over 10 years, but feeling a bit put off.  

If not for you and the others who provided "community" help, I don't know what my resources to resolve would have been.

Thanks again!

[DPNJ]

Hello DanaB27,

My request is a follow-up from 2021 and treatment of the excess $110 you pointed out requiring withdrawl in 2022.

I withdrew $200, on 10/2022, even though the excess was $110 (wanted to be safe).  I did not withdraw earnings.

Below letter is from the broker;  59 1/2 does not apply.

TT recognized the $200 as non-taxable but did not produce a penalty document yet.  I have not marked the return complete - is that why?

Any help is greatly appreciated.

Thank you!

[DanaB27]

Yes, this is correct since you removed the 2021 excess in 2022 you do not have to pay the 6% penalty on your 2022 tax return (you can see this on Form 5329 part IV). And since you only got the contribution amount returned it won’t be taxable. Please make sure you entered your net contributions in the follow-up question:

1. Login to your TurboTax Account 
2. Click on "Search" on the top and type “1099-R” 
3. Click on “Jump to 1099-R” and enter all your 1099-Rs
4. Click "Continue" on the "Review your 1099-R info" screen
5. Answer all the questions and make sure you enter the net contributions prior to 2022 (include the 2021 excess contribution that wasn’t removed until 2022) on the "Enter Prior Year Roth IRA Contributions" screen
6. Answer the remaining question.

@DPNJ

[DPNJ]

Hello,

Thank you greatly!  I will confirm my entry and advise.

Have  a wonderful day!  You're the best!