Excess Roth IRA Contribution - Reported Earned Interest

[rosesilverstar84]

I apologize for adding onto the already long list of "Excess Roth IRA Contributions" posts.

While doing taxes in 2024 for Tax Year 2023, TurboTax alerted me that my income was too high to be eligible for a Roth IRA.  Through Betterment, I withdrew a total $6,610.36 out of the Roth and put it into a taxable account ($5500.04 contribution plus the calculated $1110.32 interest). In my 2023 tax form, I can see I added $1110.32 into Schedule B Part 1 Taxable Interest.  Knowing what I know now, I probably should have done a substitute 1099-R.

Now for Tax Year 2024, I received a 1099-R with the Gross Distribution of $6,610.36, tagged as "Removal of Excess 2023 Contributions". 

1.) Do I need to amend my Tax Year 2023 form with this 1099-R?

2.) Do I still need to include the 1099-R form in my Tax Year 2024 forms?

Thank you!

[DanaB27 · Accepted solution]

1) Yes, it's best to amend your 2023 return to correct it and add Form 1099-R. Please see How do I amend my federal tax return for a prior year?

1. Click on the "Search" on the top right and type “1099-R” 
2. Click on “Jump to 1099-R”
3. Enter the 2024 Form 1099-R
4. On the "Which year on Form 1099-R" screen say that this is a 2024 Form 1099-R.
5. Click "Continue" after all 1099-R are entered and answer all the questions.
6. 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.

Also make sure you indicate in the IRA contribution interview that you withdrew the excess contribution by the due date:

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 Continue until the penalty screen and enter the excess contribution amount withdrawn.

2) If you had no taxes withheld then you do not need to enter the 2024 Form 1099-R in your 2024 return.