How do i report excess removal (done in 2024) for the contribution i made in 2023

[jtwk]

Hi, i recently discovered that the traditional IRA contribution I made for my wife for the tax year 2023 cannot be deducted because exceeds the modified AGI.  As a result, before filing the 2023 income tax, last week, I had Charles Schwab remove the excess contribution along with the earnings.  I'm told that the 1099-R for the excess contribution will not be available until 2025.  My question is since I do not have the 1099-R and because I removed the excess along with earnings (only $8.46) before filing the income tax, I don't have any traditional IRA contribution to report for 2023, correct?  Do you recommend just waiting until next year and amending my 2023 income tax?   Or do you recommend that  I manually creat 1099-R information and file the earnings as part of my 2023 income tax return?  

[fanfare]

return of excess contribution:

before tax filing date including extension: positive earnings allocable to the excess are taxable on the Line 4b for the year of the contribution. negative earnings are ignored; in which case, for purposes of basis, consider the original requested amount as returned.

-- if you want to avoid amending 2023 next year, you would report the $8.46 on your tax return now

@jtwk .

[jtwk]

That makes sense.  Thank you for your help.

[DanaB27]

Yes, you do not have to enter the traditional IRA contribution since you removed it.

If you withdrew a 2023 excess traditional IRA contribution plus earnings in 2024 before the due date, then you will get a 2024 Form 1099-R in 2025 with codes P and 1. This Form 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 withholding is 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 withholding 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 2 enter the earnings
8. Box 7 enter P and 1 
9. Check the "IRA/ SEP/ SIMPLE" box
10. Click "Continue"
11. On the "Which year on Form 1099-R" screen say that this is a 2024 1099-R.
12. Click "Continue" after all 1099-R are entered and answer all the questions.
13. 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" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2023.

[jtwk]

Hi, you state that in step 6, for Box 1, I need to enter total distribution which is a contribution (excess contribution which I removed $1749) plus earnings ($8).  However, since I removed the excess contribution, shouldn't I report '$8' for Box 1 and for Box 2 which is a taxable amount?

[DanaB27]

No, you will enter $1,757 (excess contribution plus earnings) in Box 1 and $8 in Box 2a. Only the amount in box 2a will be taxable.

[brittanyrlobo]

Do the same rules apply for a Roth IRA? 

[DanaB27]

You will get a 2024 Form 1099-R in 2025 with codes P and J for the withdrawal of the excess Roth IRA contribution made in 2023 plus earnings. 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 "Is the IRA/SEP/SIMPLE box on this 1099-R checked?" screen answer "No, the box is blank"?
11. On the "Which year on Form 1099-R" screen say that this is a 2024 Form 1099-R.
12. Click "Continue" after all 1099-R are entered and answer all the questions.
13. 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.

@brittanyrlobo