Excess Roth IRA Contribution

[JHans1]

In the 2021 tax year, both my wife and I contributed $6k each to our Roth IRAs early in the year, and by the end of the year we had earned too much to make any Roth IRA contributions so I informed TIAA prior to filing taxes and they returned the $6k each from our Roth accounts (and I therefore didn't report those $6k overpayments that had been retracted due to exceeding the income limit for Roth contributions). However, this year I received 1099-R forms for those retractions (not sure whether "retraction" is the correct word, but I assume it's sufficiently clear what I mean in this context), and they sure look like they were incorrectly processed as withdrawals from our Roth IRAs rather than retracting excess contributions. Nonetheless, when I put them in TurboTax not a thing changes on our total income, AGI, taxable income, standard dedication, and so on for 2022. Given that what was supposed to be a retraction was apparently processed as a withdrawal, but apparently has no tax consequences, is there any reason to worry about the retractions being mischaracterized as withdrawals--should I let it go and move on, or is there a compelling reason to try to set the record straight with TIAA so they are characterized as retractions rather than withdrawals?

[DanaB27]

If you made a withdrawal of a 2021 excess Roth contributions plus earnings in 2022 then you should have gotten a Form 1099-R with codes P and J. This has to be reported on your 2021 tax return and only the earnings in box 2a will be taxable.

According to the IRS to avoid the 6% tax on excess contributions, you must withdraw:

• the excess contributions from your IRA by the due date of your individual income tax return (including extensions); and
• any income earned on the excess contribution.

Please verify with your financial institute if the earnings were withdrawn (if there was a loss the withdrawn amount might be lower than the contribution amount). If you only withdrew the contribution but not the earnings (if you had them) then you will still have to pay the 6% penalty for 2021. You won't have to pay the penalty in 2022 and future years since you withdrew the contribution amount.

Please see What happens if I made an excess Roth IRA contribution for additional information.