How do I handle2023 Excess Traditional Nondeductible IRA Contribution all contributions done in 2024?

[amarlow13]

I have the same situation except it was the return in 2024 of excess Roth IRA contributions made in 2023.  It appears that I may need to use different codes than those you indicated in the instructions for the regular IRA .Please provide the way to enter this excess Roth IRA contribution situation.  Thanks very much.

[DanaB27]

You will get a 2024 Form 1099-R in 2025 with codes P and J for the withdrawal of the excess Roth IRA contributions made in 2023 for 2023 and earnings, returned in 2024. 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.

@amarlow13 

[nn18]

Hi, I am in this excess contribution return situation but different from what I have read.

I made normal contribution 6500 to my 2023 traditional IRA in 2023, then realized that I was not eligible to contribute due to no earned income. So I withdrew the 6500 contribution shortly after still in 2023. Now I have 1099-R with the same distributed amount 6500 in both 1 and 2a with "taxable amount not determined". box 7 has codes both 8 and 1. 6500 in 2a is excess contribution returned, not the earning. I was not given the option to input in Turbotax what is the actual earning amount. 6500 in 2a is automatically transfered to 4b as taxable amount that adds into my income.

I have already put the 6500 in "pay for any expense -> corrective distribution before due date", but it only removes the 10% penalty.

My question is where I could adjust the taxable amount to the correct earning?

Thanks in advance.

[dmertz]

@nn18 , you have received an incorrect Form 1099-R.  contact the payer to obtain a corrected form showing in box 1 the entire amount distributed ($6,500 + earnings), only the earnings in box 2a and box 2b Taxable amount not determined unmarked.  If the payer refuses, you'll need to submit a substitute Form 1099-R (Form 4862) showing the correct numbers, marking and explanation.

Given how close we now are to April 15, it would make sense to request a filing extension for your 2023 tax return and pay any expected balance due.

[AccountoNerd]

Hi!  I have a similar situation to the second responder in that my husband (aged 60) made a contribution to a Traditional IRA in early 2023 of $7,000 but later reversed it before the end of the year since we had some extenuating circumstances resulting in cash needs.  He did not, however, adjust the withdrawal for any earnings on the contribution.  Because of this, the custodian issued a 1099-R for 2023 with a Gross Distribution in Box 1 of $7,000 and a Taxable Amount in Box 2a of $7,000 and Distribution Code 8.  We have spoken to the custodian many times in early 2024 to express our concern that this 1099-R is incorrect and that only the earnings on the contribution should be taxable and appear in Box 2a.  We were told that since my husband did not include the earnings in the total withdrawal of the original contribution when he originally filled out the Distribution Form with them on 11/15/23, they must report the entire withdrawal as taxable and they refuse to make any changes since they "aren't allowed to backdate anything and make changes to a prior year" and my husband can't either.

I entered all of our IRA information as provided on the 1099-R into TurboTax.  TT is treating the original contribution of the $7,000 as a contribution that is limited to earned income of $6,765 with a remaining excess (nondeductible) contribution of $235.  The reversal distribution of $7,000 on 11/15/23 is being treated as a fully taxable distribution by TT since is it marked as so on the 1099-R.  This makes sense to me in that the tax implication would almost be a wash except for the $235 excess that is nondeductible. 

My question is two-fold:  Do I just calculate the earnings on the $235 excess contribution and report that on the 2023 return and file with the 1099-R as it stands (we plan to withdraw the earnings prior to October 15, 2024 as we are on extension), or do I file with a substitute 1099-R with the total of the original contribution of $7,000 plus earnings in Box 1 and just the earnings (taxable amount) in Box 2a?

Thank you!