Excess Roth IRA contribution in 2021, 2022, and 2023

[jimdeng84]

I did not realize that we cannot put money in the Roth IRA if AGI exceeds the limits. I have excess contribution of $624 in 2021, $6000 in 2022, and $1500 in 2023. I took $6000 excess contribution out in 2023 and with gross distribution of 7,864.47 including the taxable amount of $1864.47 in 2023. I need to take out additional excess contribution of $2124 as soon as possible anytime from now. However, the only Form 1099-R that I have is 2023 includes the $6000 excess contribution out in 2023 and with gross distribution of 7,864.47. (Code P - Excess contributions plus earnings/excess deferrals taxable in 2022.)

Question 1: When doing 2023 tax return, Do I need to manually input the gross distribution and taxable amount as the money has not been reflected in any 1099-R form yet (will be included in 2024 From 1099-R and will be received in 2025). That is for the excess contribution of $624 in 2021 and $1500 in 2023.

Question 2: Understand I also need to do amended return for 2021 and 2022. Do I need to manually input the gross distribution and taxable amount as the money has not been reflected in any 1099-R form yet (will be included in 2024 From 1099-R and will be received in 2025)?

[DanaB27]

You will need to request a regular distribution (without any earnings) of $624 for the 2021 excess contribution since it is after the due date. You will have to pay the 6% penalty for this excess on the 2021, 2022, and 2023 tax return.

On you 2021 tax return you will enter the Roth IRA contribution and TurboTax will automatically calculate the 6% penalty.

On the 2022 and 2023 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. On the "Do you have any Excess Roth Contributions" answer "Yes"
5. On the "Enter Excess Contributions" screen enter the total excess contribution from 2021 (if it wasn't carried over).

Next year when you get the 2024 Form 1099-R for the regular distribution the 2021 excess contribution will resolve when you enter the 2024 Form 1099-R with code J (if you are under 59 1/2).

You need request the withdrawal of the 2023 excess contribution ($1,500) plus earnings. Please be aware, if you are in the phaseout range you might want to request a little extra since the earning will be taxable on your 2023 tax return and increase your MAGI. This can create a new excess contribution.

You will get a 2024 Form 1099-R  in 2025 with codes P and J for the withdrawal of excess contributions and earnings. This 1099-R will have to be included on your 2023 tax return and you have two options:  

• You can wait until you receive the 2024 Form 1099-R in 2025 and amend your 2023 return or
• You can report it now in your 2023 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 2024 Form 1099-R into the 2024 tax return since the withholdings are reported in the year that the tax was withheld. The 2024 code P will not do anything to the 2024 tax return income but the withholdings will be applied to 2024.

To create a Form 1099-R in your 2023 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 2023?"
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 J and P
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2024 Form 1099-R.
11. Click "Continue" after all 1099-R are entered and answer all the questions.
12. 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 2022" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2023.

Your 2023 Form 1099-R with code P and J for the withdrawal of the 2022 excess contribution plus earnings will have to be entered on your 2022 amended tax return if you didn't enter a Form 1099-R with codes P and J when you filed your 2022 return.