How to report excess Roth IRA contribution

[Kellidad]

I made a contribution to a Roth IRA in 2023 that was recharacterized to a traditional IRA in 2024 before filing the 2024 tax return. Some of the 2023 Roth contribution was an excess contribution which was withdrawn as part of the recharacterization. In 2024 I received two 1099-Rs - one for the recharacterized amount and the other for the excess contribution. Both show the taxable amount as $0.00 and the one for the excess contribution shows Distribution Codes PJ.

When I complete my 2024 tax return, TurboTax asks if I have ever made an excess contribution. Since the excess and earned interest was removed, should I answer Yes or No to this question? I tried to answer Yes but TurboTax then wants to apply some of the excess to 2024 which should not apply since the excess has already been removed.

All help will be greatly appreciated. Thanks!

[DanaB27]

You will answer "No" since you removed the excess before the due date of the 2023 return. 

Generally the earning are taxable on your 2023 return but you didn't have any earnings if box 2a shows $0.

The recharacterization should have been reported on your 2023 return with these steps:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”
5. Answer ‘Yes” on the “Roth IRA Contribution” screen
6. Answer “No” to “Is This a Repayment of a Retirement Distribution
7. Enter the Roth contribution amount 
8. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount (no earnings or losses) on the next screen.
9. 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.

[Kellidad]

Thanks!

I confirmed that my 2023 tax return included the recharacterization amount and date (in 2024 before I submitted the return). However, since I received a 1099R in 2024 for the recharacterization, my 2024 return in process warns me that I can only deduct part of my traditional IRA contribution and also mentions an excess contribution amount. Since the 1099Rs were imported from the investment company, shouldn't TurboTax know that this was a recharacterization already claimed in 2023? If it does not pick this up from the 1099R how do I remove the recharacterization as a 2024 contribution?

Thanks again!

[DanaB27]

Yes, you can remove the 2024 Form 1099-R with code R for the recharacterization of the 2023 contribution from your 2024 return. But Form 1099-R with code R doesn't change anything on your return.

To clarify, did you enter a traditional contribution for 2024 in the IRA contribution interview? 

The traditional IRA deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. Please see IRA deduction limits for details.