Excess Roth IRA Contribution

Forum|Forum|5 years ago
April 13, 2021
1 reply
13 views

I have been reading lots of discussions on this forum and trying to find the correct solution to solve my excess Roth IRA problem.

Here is the story: I made a $6,000 Roth IRA contribution in 2019. When I filed tax return in July 2020, I realized that I was not eligible to make the contribution for 2019 so I made a request to withdraw the amount from my account and indicated that I would withdraw the excess before deadline in TT. However, when I was preparing for 2020 tax return in February 2021, I just realized that the request was not processed by my bank for some reason. So I had to made a normal distribution to withdraw the $6,000 contribution and $1,693 earnings (I have leaned that withdrawing earnings was a mistake) in March 2021.

Based on my research, I think what I need to do now to report the excess contribution and the correction I did would be:

1. Amend 2019 tax return to report excess contribution of $6,000 and pay the 6% penalty.

2. Enter a Form 1099-R with code J P into 2020 tax return so I don't have to amend the 2020 return later.

Is this solution correct? And since I have withdrawn the excess contribution in February 2021, do I still have to pay 6% penalty for 2020? Thank you in advance!

Best answer by DanaB27

1. Yes, you will have to amend the 2019 tax return to report the excess contribution and pay the 6% penalty. Please see How do I amend my 2019 return?

2. No, since you didn't withdraw the excess contribution by the due date of the 2019 return and withdrew it in 2021 you will receive a 2021 1099-R with code J that will go on your 2021 return.

Yes, you will have to pay the 6% penalty for 2020 since the excess contribution was not removed by 31 December, 2020.

DanaB27Answer

Level 15

1. Yes, you will have to amend the 2019 tax return to report the excess contribution and pay the 6% penalty. Please see How do I amend my 2019 return?

2. No, since you didn't withdraw the excess contribution by the due date of the 2019 return and withdrew it in 2021 you will receive a 2021 1099-R with code J that will go on your 2021 return.

Yes, you will have to pay the 6% penalty for 2020 since the excess contribution was not removed by 31 December, 2020.

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WillZAuthor

Level 2

Thank you for answering my questions, DanaB27! I have completed the amendment in 2019 TT and ready to print and mail the forms. Do I need mail the state tax amendment too? TT shows no refund or amount due. My state is Massachusetts.