how to create a substitute 1099-R for recharacterizations and removal of excess Roth IRA contribution.

[luyangyang]

I deposit $7000 into Roth IRA for 2020 in early 2020. I realized I put too much money into the account. Also I decided to switch $4231(the amount I qualify)  into traditional IRA and remove the excess $2769 from Roth IRA.  I submit both forms in Feb 2021.  There are earnings comes with those to transactions.  I understand I wont get the 1099-R form until 2022.    I haven't filed the tax return for 2020 yet.  I will like to include those recharacterization and removal of excess fund in my 2020 tax return so I don't pay 6% penalty.  I was able to enter the recharacterization part of it into Turbo Tax.  I also enter the removal amount of $2769.  But it didn't ask to enter any earning.   I thought I have to pay 10% penalty plus income tax on the earnings.  I realized I might have to create the 1099-R myself.

My questions is 1) do I have to create two 1099-Rs, one for each transaction? 2) how to fill out each form correctly?

[DanaB27]

You will create one 1099-R for the  withdrawal of excess contribution:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-R”
3. Click on “Jump to 1099-R”
4. Select "I'll type it in myself"
5. Box 1 enter total distribution (contribution plus earning)
6. Box 2 enter the earnings
7. Box 7 enter P and J 
8. On the "Which year on Form 1099-R" screen say that this is a 2021 1099-R.

Yes, you will pay a 10% early withdrawal penalty on the earnings.

You do not need to create a 1099-R for the recharacterization since a 1099-R with code R will do nothing to your return.  The only way to report the recharacterization is with the steps below (you mentioned you have already done this):

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “IRA contributions”
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution
6. Enter the Roth contribution amount 
7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
8. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.

[luyangyang]

Thank you very much.  I just did that.  It goes into my next question.  I got to the step asking "contribution withdrawn before due date."  Do I enter $2769 as I already create the substitute 1099-R? 

[DanaB27 · Accepted solution]

Yes, please enter the withdrawn contribution amount of $2,769 ( without the any earnings) in the step asking "contribution withdrawn before due date."  This will let TurboTax know that you withdrew it and don't owe the 6% excess contribution penalty.

[Amariott]

Im on ssi and trying to get my stuff took care of for the economic impact payment 

[MarilynG1]

@Amariott See the post from @DanaB27 above.

You will need a 1099-R to report the Removal of Excess Contribution, with contribution in Box 1, Earnings in Box 2 and Codes J/P in Box 7. 

The recharacterization is reported in the IRA Contributions section.

Click this link for more info on how to Create a 1099-R to Report Excess Contribution.