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Zek
New Member

How to submit correct distribution information for Traditional IRA

I made a Traditional IRA distribution that was supposed to be a reversal of a contribution within the same tax year. I did not submit it as "excess contribution" because technically it was an allowed contribution, but I was not eligible for the tax break, and I didn't want to keep it.

 

I also had some funds withheld from the distribution in the amount of 10% for early distribution as a "just in case", and I didn't want to be considered behind on taxes.  Because I made sure to take the distribution before April 15, I believe this distribution is not taxable under "Returned IRA Contributions" here:
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-exceptions-to-tax-o...

 

Now I have a 1099-R form which says I took a distribution plus federal withholding, and I'm not sure how to submit this as a non-taxable distribution and get the federal withholding back.

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3 Replies

How to submit correct distribution information for Traditional IRA

Please check back later. I'll page @dmertz.

How to submit correct distribution information for Traditional IRA

You can't fix this on your own.  If it is fixable at all (it may not be), you would have to get the IRA custodian to issue a corrected 1099-R.  Even if you try reporting it on your tax return as a non-taxable correction, the fact that the 1099-R is coded as a regular distribution will mean that the IRS computers will automatically send you an assessment for taxes and penalties. 

 

I believe you can reverse a contribution for any reason within the tax year, not just for excess contributions.  You also have to withdraw the earnings on the excess contribution, because those earnings are taxable in the year the contribution was made.  The problem is that, having made a regular withdrawal, this may be un-fixable, and you are stuck with the taxes and early withdrawal penalty.  

dmertz
Level 15

How to submit correct distribution information for Traditional IRA

What is the code in box 7 of the Form 1099-R provided by the payer?

 

Tax withholding on a 2024 Form 1099-R is credited on your 2024 tax return, not on your 2023 tax return.

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