How do I report an excess contribution made to my Roth account in 2016 on my 2016 taxes? The excess and earnings were removed in Feb 2017.

[d5marino]

I would rather include the earnings on my 2016 taxes than amend next year after I receive the 2017 1099-R in Jan 2018.  Should I create 1099-R and include Code 8?

[macuser_22]

Yes, you can do that if you know the earnings (if any). 

Enter the total amount of the returned contribution plus earnings in box 1, and the earnings in box 2a, code "J" in the top box 7 and "P" in the lower box 7 - NOT code 8.     The "J" says that it is a Roth and the P says taxable in 2016 on a 2017 1099-R

The interview for a code "JP" will ask if this is a 2016 or 2017 1099-R - choose 2017.   The 2017 code P means taxable in 2016 (not 2015) since this will be a 2017 1099-R that you will get - not a 2016 1099-R.

When the 1099-R comes next Jan. 2018,  you can ignore it.

[d5marino]

I just entered the 1099-R as instructed and it worked perfectly.   There are so many conflicting answers to this issue and I hope others will follow your instructions.  Thank you so much!

[bloganny]

My software has "return of contribution taxable in 2015" in "P" and it does not ask me about 2016 or 2017.  Box "8" has "return of contribution taxable in 2016".  what am I doing wrong?

[macuser_22]

Code P on a *2016* 1099-R is for the 2015 tax year.   You are entering a *2017* 1099-R which advances the year by 1, so a 2017 1099-R with a code P means taxable in 2016.

Two for three screens after entering the 1099-R information there is a screen that asks "Which year is on the 1099-R form?"  - choose 2017.

If it was a code 8 then it would be on a 2016 1099-R that you would already have.

[aclsmb1smbacl]

I have a similar situation, but I'm removing all of my 2016 Roth IRA contributions of $5500 to make space to carry over my $5500 2015 excess due to AGI limit, which I didn't realize until this year, 2017.  What I don't understand is when I use the combo of code J and P, Turbo Tax seems to add the 2016 $5500 contribution that I'm withdrawing into my taxable income.  So in my case the specifics in my substitute "2017 1099R" (since I did this withdrawal of 2016 contributions in 2017 and won't get an actual 1099R until January 2018) are:  Box 1 = $6605.92 (which is $5500 2016 after tax contribution + $1105.92 earnings on that 2016 after tax contribution) and Box 2a = $1105.92 (taxable earnings).  Any ideas? Everything else looks perfect on the 2016 5329 form when I look at it directly in Turbo Tax.  I'm getting the 10% penalty on just the taxable portion of $1105.92 as I would expect.  But both the after tax $5500 2016 contribution AND the $1105.92 taxable earning are being added to my income.  I should only have the $1105.92 added as taxable earnings, correct?

[macuser_22]

@aclsmb1smbacl  - It will show as income on the summary screen which shows gross income, not taxable income.
The income ($6605.92) should  be reported on line 15a on the 1040 form.
The taxable amount ($1,105.92) will go on line 15b.
And the penalty on line 59.

[aclsmb1smbacl]

Awesome, you are right!  Thank you!

[shancol]

I have a excess 2016 contribution to a Traditional IRA that took a loss.  The "excess" withdrawn in 2017 was less than the original contribution.  Do I use code 8 in top box 7 and code P for bottom box 7?

[macuser_22]

@shancol - No.   Only a code "P" but for a Traditional IRA you check the IRA/SEP/SIMPLE box as well.  That tells it that it is a 2017 return of a 2016 contribution for a Traditional IRA.

[shancol]

Thank you!

[Mas_Char_02_31]

You seem knowledgeable on Roth IRA Excess Contribution Withdrawals in TurboTax. 

Discovered in March 2019 I was over the AGI limit, so my 2017 and 2018 Roth IRA contributions were considered Excess Contributions.  Vanguard said to withdraw (which I did in March 2019), and that only current year (2018) would need to report earnings.  Any earlier years excess contributions would be assessed a 6% penalty, but no calculation for gains/loss would be considered.

The 2019 1099-R shows one line item consolidating 2017+2018 removal of the excess.

Gross Distribution (Box 1) = 12,899.36.  Box 7 = PJ

2018 excess contribution withdrawn $6399.36 3/12/19 before deadline, with a loss.  So, no penalty, no taxes due. 

The 2017 contribution was withdrawn 3/12/19, full amount of $6500.  Only penalty due.

Questions

1.  Does each one line on the 1099-R have to equate to one entry in TurboTax?  Or am I supposed to break these out by the year the contribution was made?

2.  Does TurboTax calculate the penalty (Used to show on Line 59, now on Schedule 4)?

3.   For the 2018 excess, in TurboTax, do I plug in $6399.36 in Box 1, and Box 2a = 0, and Code P for bottom box 7 and leave top box 7 empty?

4.  For the 2017 return, in TurboTax, do I plug in $6500 in Box 1, and Box 2a = 0, and let TurboTax calculate the penalty?  What code goes in Box7 top and bottom?

[macuser_22]

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@Mas_Char_02_31 wrote:

You seem knowledgeable on Roth IRA Excess Contribution Withdrawals in TurboTax. 

Discovered in March 2019 I was over the AGI limit, so my 2017 and 2018 Roth IRA contributions were considered Excess Contributions.  Vanguard said to withdraw (which I did in March 2019), and that only current year (2018) would need to report earnings.  Any earlier years excess contributions would be assessed a 6% penalty, but no calculation for gains/loss would be considered.

The 2019 1099-R shows one line item consolidating 2017+2018 removal of the excess.

Gross Distribution (Box 1) = 12,899.36.  Box 7 = PJ

2018 excess contribution withdrawn $6399.36 3/12/19 before deadline, with a loss.  So, no penalty, no taxes due. 

The 2017 contribution was withdrawn 3/12/19, full amount of $6500.  Only penalty due.

Questions

1.  Does each one line on the 1099-R have to equate to one entry in TurboTax?  Or am I supposed to break these out by the year the contribution was made?

2.  Does TurboTax calculate the penalty (Used to show on Line 59, now on Schedule 4)?

3.   For the 2018 excess, in TurboTax, do I plug in $6399.36 in Box 1, and Box 2a = 0, and Code P for bottom box 7 and leave top box 7 empty?

4.  For the 2017 return, in TurboTax, do I plug in $6500 in Box 1, and Box 2a = 0, and let TurboTax calculate the penalty?  What code goes in Box7 top and bottom?

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This is an old post that you are taging on to, and this might get complicated since 2017 is beyond the time limit to remove tax free.

Starting with 2017.    If you did not report the excess in 2017 then  you need to amend 2017 and add the contribution as a excess contribution that will produce a 2017 5329 form with a 6% penalty since the 2017 excess contribution was not removed by Oct 15 of 2018.

You need to do the same  6% penalty for 2018 since the excess was still not removed in 2018.

You do not owe any 2019 6% penalty because the 2017 excess was removed before the end of 2019 and the 2018 and 2019 excess was removed as a return of contribution.

Your 1099-R is incorrect if the box 1 amount includes both the 2017 and the 2018 excess contributions because it is to late to return the 2017 excess as a "return of contribution" as the code "PJ" reports.  ONLY the 2018 contribution excess should be in box 1 and the earnings attributed to that excess in box 2a.  This code PJ must be reported on an amended 2018 return.

The 2017 excess can ONLY be removed with a normal distribution which would have the amount in box 1 , a blank box 2a and box 2b (not determined checked) and a code J in box 7 (or T if older than 59 1/2).  The earnings attributed to the 2017 excess are not to be removed since the previous 6% penalty allows the earnings to remain in the account.

I suggest you contact the IRA custodian for a corrected 1099-R for  the 2018 return of contribution and a new 1099-R for the 2017 distribution that cannot be a "return of contribution" (code PJ).  What you described requires two 1099-R's.   The 2019 1099-R with code PJ reported on an amended 2018 tax return since it was a 2018 contribution,  and a 2019 1099-R with a code J (or T) reported on your 2019 tax return since it was a 2019 distribution..

[2004taxfile1]

I have similar case.

For Roth IRA excess contribution ($6500) made in Jan 17, 2017 (at age 58, March 31, 2017 turned to 59),  removed contribution with earnings in March 2021:

Q1:  Do I pay 10%  early withdrawn penalty for each year plus 6% penalty for over 5 years?

Q2:  Do I need to amend  tax return1040 for 2017, 2018,2019,2020, 2021 to pay taxes on earnings?

thanks a lot!

[ThomasM125]

@2004taxfile1 The early withdrawal penalty would just apply to 2021 since that is when you made the withdrawal. You would pay the 6% penalty for each year you had the excess contribution in the IRA. You would need to amend each year separately.