I made an excess Roth IRA contribution and need to pay tax and penalty on the earnings. I have converted the contribution to a 2018 contribution but need to pay the tax

[lawrence-becker]

I made an excess contribution to my Roth IRA of $3000 in 2017.  I have now done paperwork to change that contribution to a 2018 contribution to the same Roth IRA.  I was advised by my broker that I will simply have to pay tax on the income earned by that $3000 (which they have calculated to be $42.30) and I have to pay a penalty on that money as well.I am using TurboTax Deluxe and I have answered all the questions it asks me about this but there is no place for me to put in (or that I can find at least) the $42.30 in income so it can calculate the tax owed and the penalty.  It never asks me in any of the prompts how much I earned, etc.  Can someone help me to navigate the TurboTax part of this and get it to ask me the right questions?  Alternatively, is there a number where I can get someone live on the phone (from TurboTax) to help walk me through this in their software?

[dmertz · Accepted solution]

Apparently the broker made a return of excess contribution of the $3,000, distributed an adjusted amount of $3,042.30, then deposited the $3,042.30 as a contribution for 2018 (so make sure to include the entire $3,042.30 when reporting your Roth IRA contributions for 2018 next year when you prepare your 2018 tax return).

Since you won't receive the 2018 Form 1099-R until next year, to report the earnings on your 2017 tax return you must enter the 2018 Form 1099-R as if you have already received it:

• Box 1 = $3,042.30
• Box 2a = $42.30
• Box 7 = codes J and P

2017 TurboTax's drop-down text will indicate that code P means taxable in 2016, but that assumes that you are entering a 2017 Form 1099-R.  In the Follow-up you'll indicate that you are entering a 2018 Form 1099-R on which code P means taxable in 2017.  The $42 will be included on Form 1040 line 15b and the 10%, $4 early-distribution penalty will be included on Form 1040 line 59.  If you were over age 59½ at the time of the return of contribution, you can claim an Other reason exception to the early-distribution penalty on the $42.