I am reversing my Excess Roth contribution plus interest earned, which line do I enter the interest earned on 1040? should I receive a form from the bank?

[macuser_22]

Yes, you will receive a 2019  1099-R if removed in 2019.   
What yesr was the contribution for - 2017 or 2018?

What will be on the 1099-R depends if it was a 2017 contribution made in 2018 or a 2018 contribution made in 2018.   It also depends if you just took a "normal" distribution or if you asked the IRA custodian for a "return of excess contributions".

How to enter depends on how it will be reported and which year the contribution was for.

[macuser_22]

Also you said "reverse" does that mean "removed" or did you have it recharactorized to a Traditional IRA and the contribution is now in a Traditional IRA?

[Anonymous]

I took RMD from my traditional IRA and converted it to ROTH (mistake) in July 2018, I am trying to reverse the Roth transaction before April 15 to avoid the 6% penalty.  The bank will issue 1099R with a code JP for the total amount including interest earned.  I need to report the interest in my 2018 tax return but not sure where to book this entry on my 1040.  Should the bank send me a form 5498?
Can't find anyone (not Bank, not CPA) familiar with my situation, need help!

[Anonymous]

My RMD and conversion to Roth process was done in Jul 2018.  The bank just issued a 2018 1099R code JP to withdraw the excess.  Should the 1099R have a 2019 instead of 2018?  Your reply will be most appreciated.

[macuser_22]

A 2018 1099-R with "JP" indicated a 2017 contribution returned in 2018 that would be incorrect.

The bank is probably trying to cover it's error by issuing a retroactive 2018 1099-R because you first asked for the return in 2018 and they failed to do so, however, now they have compounded the error by putting the 2019 coded on a 2018 1099-R.  A 2018 1099-R for a 2018 contribution returned in 2018 would be code "J8".

You should try to get the bank to correct that with the correct codes, otherwise the IRS will probably be asking why it is not on your 2017 tax return.

[macuser_22 · Accepted solution]

*IF* you requested a return of contributions due to an excess contribution and the excess was removed before the extended due date of the 2018 tax return and the earnings were also returned and you know that the IRA custodian will report this as a return of contribution and not as a normal Roth distribution - then:

You can just report it now and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or box 12 State withholding. Then you must also enter the 2019 1099-R into the 2019 tax return since the withholding is reported in the year that the tax was withheld. The 2019 code P will not do anything in 2019 but the withholding will be applied to 2019.

You would enter the 1099-R with the total distribution in box 1 (the contribution plus the earnings),

The earnings in box 2a,

Enter code "P" in box 7 (Top) - don t worry that it will say "taxable in 2017 "

Enter code "J" in box 7 (Bottom).

On the "Which year" screen say that this is a 2019 1099-R.

After the 1099-R summary screen press continue.

If you are over 59 1/2 then on the "Lets see if we can lower your tax bill" enter the box 2a amount in the "Another Reason" box to eliminate the 10% early withdrawal penalty on the earnings.

Enter the explanation for the excess contribution and that you are reporting a 2019 1099-R on your 2018 tax return to avoid having to amend in 2019.

The box 2a earnings will be taxable income reported on line 4b on the 1040 form and if under age 59 1/2 will also be subject to a 10% penalty on a 5329 form that will be reported on line 59 on the 1040 Schedule 4 form.

[Anonymous]

I am 80, required to take RMD, I have asked the bank to reverse the Roth contribution in 2018, since no one at the bank was familiar with this process. It drags on to 2019.   I think the bank is going to issue the 1099R as 2018.  Hope the reversal process will wrap up this problem.   Thanks very much for your help.

[macuser_22]

If a 2018 1099-R then the box 7 codes would be a "J" & "8".   That will do the exact same thing but for a 2018 1099-R instead of a 2019 1099-R.

And note my answer 3rd to last sentence : "If you are over 59 1/2 then on the "Lets see if we can lower your tax bill" enter the box 2a amount in the "Another Reason" box to eliminate the 10% early withdrawal penalty on the earnings."

The code "J" says that it is a early distribution for being under age 59 1/2 but the code J is *required* to tell the IRS that this is a Roth IRA so it is necessary to remove the penalty as an exception as noted.  A 1099-R with only a code 8 and not also J would be a non-Roth account.

[bnbalison2]

What if I contributed in July 2020, reversed it in March 2021, identified the reversal on the 2020 return, BUT then received 1099R in early 2022 showing the reversal and taxable earnings from 2021.

My 2021 tax return TurboTax does not put the earnings into line 4B of 1040 like I had hoped.....do I manually add it or is there a different way?   I really don't want to amend 2020 return.

Also, I'm confused on your sentence in the response "Enter the explanation for the excess contribution and that you are reporting a 2019 1099-R on your 2018 tax return to avoid having to amend in 2019."   Do you mean to say reporting on 2019 tax return to avoid having to amend the 2018 return? 

Thanks

[macuser_22]

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@bnbalison2 wrote:

What if I contributed in July 2020, reversed it in March 2021, identified the reversal on the 2020 return, BUT then received 1099R in early 2022 showing the reversal and taxable earnings from 2021.

My 2021 tax return TurboTax does not put the earnings into line 4B of 1040 like I had hoped.....do I manually add it or is there a different way?   I really don't want to amend 2020 return.

Also, I'm confused on your sentence in the response "Enter the explanation for the excess contribution and that you are reporting a 2019 1099-R on your 2018 tax return to avoid having to amend in 2019."   Do you mean to say reporting on 2019 tax return to avoid having to amend the 2018 return? 

Thanks

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No.    You cannot pay the tax on the box 2 amount in 2021 since it was a 2020 contribution that can only be reported on an amended 2020 tax return.      I assume you received a 2021 1099-R with a code "P" in box 7 that can only be reported on an amended 2020 tax return.   Returned earnings are reported in the tax year that the contribution was *for*, not the year returned.