How do I Pay a 2019 1099-R This Year (2020)?

[yipoye8791]

I have a 2019 1099-R from Vanguard as I am currently doing my 2019 taxes. Vanguard advised me to withdraw that amount because I had over-contributed due to income limits. I didn't realize my income was going to be as high as it was. TT says I might need to amend my 2018 return which I don't want to do because I'll have to refile with the state and city. Beyond that, I thought the extra money I earned in 2018 was going to be a one time event but I got a new job and now my new income is above the threshold so I also need to withdraw the first few contributions I made at the beginning of 2020. How can I pay the amount I'm going to withdraw for 2020 contributions in addition to the amount below from the 2019 1099-R on this year's (2019) tax return?  I just want to be done with this mess.

Box 1 - $5340.71

Box 4 - 0

Box 7 - PJ

Box 12 - 0

[DianeC958]

You can report the excess contributions and earnings you withdrew on your 2019 return even though is was not removed until 2020.

You report the information in your 2019 return as a substitute 1099-R.  Put the excess amount withdrawn in Box 1 and the Taxable Amount in Box 2 (this amount is the earnings on the excess contribution) and for Box 7 use codes J and P.  

You will be penalized 10% on the early withdrawal of the earnings.  

Then when you receive the 1099-R in 2021 for the withdrawal you do not need to report it on your return.

[yipoye8791]

Thank you for responding. I see where I'm able to select the checkbox for substitute 1099-R but I'm worried because TT says you will have to enter an explanation of communication with the plan administrator. I don't have any communications. Also that amount in box 1 includes my base contribution so should I subtract 5,500 (max 2018 contribution which was my cost basis) from the amount so only the profits are taxed? In this case the amount would be negative? So confused. I need stupid simple steps.

Plus I need to call Vanguard Monday and figure out how to unwind this for 2020 contributions I made in Jan, Feb, March of this year. I'm never going to invest in Roth IRA again until after the year is over and I know I can make contributions based on the income I made that year. 

[dmertz]

Disregard DianeC958's answer.  It was based on a mistaken belief that this was a return of contribution obtained in 2020 for a contribution made for 2019.  This does not involve filing a substitute Form 1099-R, you already have a correct Form 1099-R.

It appears that there are no taxable earnings shown in box 2a of this 2019 Form 1099-R.  (In fact, I suspect that there was a loss in value since the amount distributed was slightly less than $5,500 that I suspect was the contribution returned.)  If your 2018 tax return did not show an excess Roth IRA contribution on Form 5329 and box 2a of the Form 1099-R has no taxable amount in box 2a, there is no need to amend your 2018 tax return or do anything else.  Just retain everything regarding the contribution for 2018 and the return of that contribution in case the IRS ever questions whether or not your Roth IRAs still contain the excess contribution.

Because there is no tax withholding, this code JP 2019 Form 1099-R has no effect on your 2019 tax return.  2019 TurboTax only responds to it by indicating that the effect of the return of contribution needed to be reflected on your 2018 tax return.

[yipoye8791]

Thank for the clarification! So if I'm understanding you correctly, I can leave everything as is for 2018 and 2019? I do not have anything in box 2a of the 2019 1099-R and I did not have a form 5329 in my 2018 return though.

[dmertz]

Correct.  You 2018 tax return should have included an explanation of the recharacterization, but it's probably too late to bother with providing that if your 2018 did not include that.  It probably makes more sense just to have the explanation ready to provide if the IRS ever asks for it.  The IRS will be able to see from the 2018 Form 5498 that there was a contribution and from the code JP 2019 Form 1099-R that there was a return of contribution, but the fact that there was an investment loss on the returned contribution means that they won't have sufficient information to determine precisely what amount of contribution was returned and that's where you explanation fills in the missing piece.  Presumably it was a $5,500 contribution that was returned, so from the Form 1099-R the IRS would only be able to determine that some amount between $5,340.71 and  $5,500 was returned, although they might suspect as I do that the amount of contribution returned was $5,500 with the amount distributed being $5,500 minus an investment loss of about 2.9%.