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Level 3

Filing tax with excess/unwanted Roth Contribution

75yo mother made a $7k Roth Contribution for 2019 on 3/5/2020 and filed 2019 taxes before 4/15/2020 deadline. Processed an unwanted withdraw of this contribution on 5/27/2020 at a loss (bearish market). It is an unwanted withdraw (rather than excess) due to our mistake. We mistakenly thought it was a 2020 Roth IRA contribution (no earned income so don't qualify) rather than 2019 (had earned income so qualifies). So processed the unnecessary excess contribution. Thus, we'll call it "unwanted" contribution post mortum.


Just got a 1099-R coded 8J. 8 is correct since contribution and withdraw is in the same calendar year. Box 2a = $0 since it was a loss.


Question is what to do to file taxes. This is my understanding




- No penalty since this was just a return of contribution and withdraw by extension filing date (10/15/2020)




- File amended return with in 6mo of extension filing date so have until 3/15/2021

- Write "Filed pursuant to Section 301.9100-2" on top of 1040X

- Delete the $7k contribution. TTax tracked basis will be corrected accordingly

- Provide an explanation




- Include 2020 1099-R

- No tax impact since box 2a = $0

- No need to file 5329


Is this understanding correct?

2 Replies
Level 15

Filing tax with excess/unwanted Roth Contribution

What year in on the 1099-R?   If a 2020 1099-R then the code "8" says that this was a return of a 2020 contribution  made *in* 2020 *for 2020, not a 2019 made *in* 2020 *for* 2019 - that would require a code "PJ".


Perhaps it was supposed to be a 2019 contribution  but the financial institution posted to for 2020 instead.


This would be reported on the 2020 tax return and result in no tax or penalty.



**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Level 3

Filing tax with excess/unwanted Roth Contribution



Its a 2020 1099-R.


It was a 2019 tax year contribution made on 3/5/2020. 2019 taxes filed by 4/15/2020 including this contribution.

Withdraw was made on 5/27/2020 (after 2019 tax filing) and suppose to be for withdraw of this contribution.


There appears to be conflicting interpretation of code 8 and P.


A. Some interpret 8 as contribution+withdraw made in the same "calendar" year. P is different "calendar" year.

B. Some interpret 8 as withdraw for the tax year for the 1099-R and P as previous tax year withdraw.


Called the IRA custodian (Fidelity IRA dept) and also researched online (unfortunately can't post links here). Fidelity's interpretation is A after supervisor consultation internally. They specifically say contribution+withdraw in the same calendar year.


Yours interpretation is B.


Which is correct? Read through IRS directions for 1099-R and Internal Revenue Code 408(d)(4). Unfortunately they don't shed much clarity.


I guess need to get this code correct first (and get a corrected 1099-R if Fidelity is wrong) Then determine the appropriate 2019 Amend and 2020 tax return actions.

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