How to handle 1099-R (2022) when I filed using Substitute 1099-R (4852) in 2021 (Gross distribution > reported due to 2nd excess withdrawal)?

[beccat66]

Hello Community!

For tax year 2021 I had to withdraw excess Roth IRA contributions in 2022 and I filed my 2021 return using a substitute 1099-R (form 4852) with the numbers from the brokerage firm that I had at the time I filed my return in April 2021.  I had to make a 2nd excess contribution withdrawal in 2022 after I filed my TY2021 return as I learned my excess was a bit more than originally determined, which I paid an excess penalty for with my 2021 tax return.

I received a 1099-R (2022) from the brokerage firm in Jan 2023 and the Gross Distribution value is higher than what I reported on the 4852 filed for TY2021 because of the total of the 2 excess contribution withdrawals.  The Taxable amount is the same as what I reported on the 4852 filed for TY2021.   Box 7 has codes J and P in it on the 1099-R (2022).

My question is what is the correct thing to do with this 1099-R (2022) when filing my 2022 taxes? 

Also do I need to file an amended return for 2021?   In TurboTax 2022 I did enter the 1099-R (2022) and received a message that I need to file an amended return for 2021.

Can someone advise the right way to handle this 1099-R?  Please let me know if my situation and question aren't clear and I'll try to clarify.

Thank You,

Rebecca

[LindaS5247]

You wouldn't enter the whole thing because you have already reported it for 2021 (except for the extra withdrawal.  You got the message you need to file a 2021 amended return because your 1099-R probably indicates that it is a 2021 excess.

So you would either have to enter the 1099-R information less what you have already reported, or amend your 2021 tax return to report the whole withdrawal.  Did you have any gains or losases on the excess and if so how did you account for that?

The proper way to do it is as follows:

If you received a 2021 401(k) excess deferral distribution in 2022, you'll receive a 2022 Form 1099-R with a distribution Code P in box 7; however, it must be included on your 2021 tax return. You have two options to do that:

1. Wait until next year when you receive the 2022 Form 1099-R and amend your 2021 tax return
2. Report it now on your 2021 return and ignore the 2022 1099-R when it comes next year
   • If your 2022 Form 1099-R has an amount in box 4, Federal tax withholding and/or box 14 State withholding, then you must enter it on your 2023 tax return. The 2022 Code P won’t affect your return, but the withholdings will be applied to 2022.

Select your choice below and follow the instructions.

Amend your 2021  tax return:

1. Sign in to TurboTax, scroll down, and open Your tax returns & documents
2. Select 2021, then Amend (change) return, then Amend using TurboTax Online
3. On the OK, let's get a kickstart on your 2021 amended return screen, select Adding or updating a tax form then Continue
4. On the Which one of these forms do you need to add to your return? screen, select 1099-R then Continue
5. Continue through the screens and answer all the questions

If you haven’t filed your 2021 return yet and want to report a 2021 excess 401(k) deferral that was distributed in 2022:

1. Sign in to TurboTax and open or continue your return
2. Go to Wages & Income under Federal
3. Under Less Common Income, select Start or Revisit next to Miscellaneous Income, 1099-A, 1099-C
4. Select Start next to Other income not already reported on a Form W-2 or Form 1099
5. Answer Yes to Did you receive any other wages?, then Continue
6. Continue until you get to the Any other earned income screen. Answer Yes and select Continue
7. On the Enter Source of Other Earned income screen, select Other and Continue
8. On the Any Other Earned Income screen, enter 2021 Excess 401(k) Deferrals for the description, enter the amount, and select Done

For Tax Year 2022:

Your 2022 Form 1099-R form will be issued reporting the excess 2021 401(k) deferral you received as a distribution in 2022.

• You can ignore a Form 1099-R with code P in box 7 if you reported the excess as described above in 2021
• But, the earnings on Form 1099-R with code 8 in box 7 should be reported in 2022

If you don't take out the excess amount by the due date, you're taxed twice on the excess deferral left in the plan. This happens once when you contribute it and again when you receive it as a distribution. You can't include the excess amount in the cost of the contract even though you included it in your income.

If this does not help please feel free to come back to TurboTax Community with any additional details or additional questions or click here for information on Turbo Tax Support.  You can connect with a Live TurboTax Agent and share your screen.

[beccat66]

Hi Linda,

These were excess contributions to my Roth IRA in 2021 (not a 401k) that were withdrawn along with the earnings on them in 2022.  Since I entered a substitute 1099-R using form 4852 on my FY2021 taxes and had a form 5329 which calculated my additional tax on my outstanding excess contribution, do I amend my FY2021 taxes and update that substitute 1099-R with the actual values from the 1099-R (2022) I received in January 2023 or add a second 1099-R when I amend my FY2021 taxes?

Thank you!

[JohnB5677]

If this was an adjustment made for your 2021 tax return, it should not be included on your 2022 tax return. 

• If you "CORRECTLY" filed a substitute 1099-R on your 2021 tax return, your job is complete.  
• The substitute 1099-R covers you for 2021 and the new form 1099-R that you got this year does not have to be posted.
• If your 2021 tax return is available, you should retain the new 2022 1099-R with the tax return.

If I've misunderstood your question, and this does not completely answer it, please contact us again and provide some additional details.

[beccat66]

John,

I correctly filed my substitute 1099-R on my 2021 tax return with the amounts and other data I had at the time, but since I had to make a 2nd withdrawal of excess contributions after I filed my 2021 tax return the 'Gross distribution' amount increased although the 'Taxable amount' did not since I actually incurred a loss on the 2nd excess contributions withdrawal.  My 2nd withdrawal of excess contributions was completed in July 2022 just as my first one was, but the 2nd one was not completed until after I filed my 2021 tax return on April 18, 2022.

I'm trying to determine if I need to file an amended 2021 tax return to reflect the final 'Gross distribution' from the 1099-R (2022) I received in January 2023.

I also don't understand what other change I might need to make on an amended 2021 tax return to show that I did withdraw the additional excess contribution that I paid the 6% penalty on in 2021.

Thank you,

Rebecca

[ThomasM125]

You probably don't need to amend the 2021 return since you don't have any income to report and the 1099-R form is for 2022. The worst that would happen is the IRS would inquire about it but you could explain what happened. 

You woudn't need to list the excess contribution withdrawal on your 2021 return.