I mistakenly opened Roth IRA with EARNED INCOME. I withdrew the money and received a 1099 to report as Income. How do I report thisom my tax return?

[rlmiddleton]

I am 78, retired with no earned income. If I report the withdrawal to IRS it will to be taxed but I have already paid taxes on the contribution,

[fanfare]

return of excess contribution:

before tax filing date including extension: positive earnings allocable to the excess are included in income on 1040 Line 4b for the year of the contribution. negative earnings are ignored; in any case, for purposes of basis, consider the original contribution amount as returned.

NOTE: You must request the custodian to do this for you.

if you made a withdrawal on your own you have not acted correctly.

@rlmiddleton 

[rlmiddleton]

No I did not get an answer that resolved my problem.

I opened a Roth IRA with $7500 of UNERNED INCOME in which income taxes have already been paid.  I withdrew that money and closed the IRA.  I now have a 1099-R that lists that money as income and will be taxed accordingly.  My question is how do I handle that 1099-R entry on my 2024 tax return to avoid paying taxes a second time.

Thank you for your time!!

[rlmiddleton]

I now realize that I did not handle that correctly.  How do I handle it after the fact?

[VolvoGirl]

  I'll page someone who knows more  @dmertz 

[DanaB27]

To confirm, you didn't request the withdrawal of excess contributions plus earnings but instead took all money out and closed the account. If it was a regular distribution then your Form 1099-R probably has code J or T?

For your information, you can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free. But the earnings will be taxable since the Roth IRA was open less than 5 years and therefore you didn't receive Qualified Distributions.

Since you didn't request the withdrawal of excess contributions plus earnings you will have to enter the Roth IRA contribution:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Continue until the penalty screen and do not enter the excess contribution as withdrawn.

Entering the amount as not withdrawn will show TurboTax that you had contributions in the Roth IRA and TurboTax will only tax the earnings. Since the account was closed and you have a $0 balance, you won't get the 6% penalty calculated.

You follow the steps below to enter Form 1099-R:

1. Login to your TurboTax Account 
2. Click on "Search" on the top and type “1099-R” 
3. Click on “Jump to 1099-R” and enter all your 1099-Rs
4. Click "Continue" on the "Review your 1099-R info" screen after you entered all you Form 1099-R
5. Answer "Owned Any Roth IRA for Five Years?" screen
6. Continue through the questions and make sure you enter the net contributions prior to 2024 on the "Enter Prior Year Roth IRA Contributions" screen
7. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" since you are over 59 1/2

@rlmiddleton