Income earned on excess Roth IRA investment

[jonneff]

I had an excess contribution to my Roth IRA.
My investment company has calculated the unauthorized earnings on this investment prior to my withdrawal of the overage.  Where do I declare these earnings in Turbo Tax?

[dmertz]

*In* what year was the excess Roth IRA contribution made?
*For* what year was the contribution made?

[jonneff]

It was made in 2016 for 2016 TAX YEAR.  I withdrew the overage in 2017 and am in the process of withdrawing the excess earnings as well.  I have not yet filed my 2016 tax return.  I live overseas and filed for an extension, so my filing is not due until October

[jonneff]

I saw where I was supposed to withdraw the excess contribution, but do I include the unauthorized earnings in that figure as well?  Or is that entered separately somewhere else?

[jonneff]

When I get to the page where it says Enter Your EXCESS Contribution, the amount is there,  with a warning that it should be withdrawn, but when I click continue it asks for the value of the IRA on 12/331/2016, and when I click continue it shoots me back to the summary page of "Your 2016 Deductions & Credits".  It doesn't give me any follow up where I can respond that I have withdrawn any of it (it did previously, but not now), and I need to increase that amt to include the earnings).   Why is it not asking me this anymore?

[dmertz]

Perhaps you've already indicated the amount that you had (or will have) returned to you.  If so, TurboTax won't again present the page asking you to enter the amount returned.  I suggest checking line 26 of the IRA Contribution Worksheet to see if it already shows the same amount as line 25.  (To do so with online TurboTax, you'll need to download the pdf containing all of your worksheets.)  Also, if the net contribution is zero, TurboTax won't include an excess contribution penalty on Form 1040 line 59 for this returned contribution.

I was mistaken that TurboTax asks you to enter the explanation statement following the indication that you will remove the excess (entering the line 26 amount above).  TurboTax actually asks for this in the follow-up to entering the code JP 2017 Form 1099-R.

[jonneff]

That is exactly what I did.  So there must be some kind of work around, NO?
What if I go in and
1. say that I did NOT make any contributions, and/or excess contributions
2. Save it and get out.
3. Go back in and reenter the same data, will it then let me go though the normal process where I can then show the full amount withdrawn?

If not, then can we call on tech support (how?) to intervene and make things right?

[dmertz]

You can force TurboTax to present the page again by increasing the amount that you entered as your original Roth IRA Contribution.  Change it to, say, $10,000.  Since this will be more than the amount that you would have previously entered as the amount returned, TurboTax will certainly determine that you've entered an excess contribution and again present the page to enter the amount returned.  Zero or delete the previously entered amount returned.  Continue and go through the process again, this time changing the $10,000 contribution amount to the amount that you actually originally contributed.  Since the previously entered amount returned is now no longer present, TurboTax will again calculate the excess contribution and present you with the page where you will be able to enter the amount returned.  Once you do so, you should end up back where you are now, but you will have been able to ensure that you have entered the amount of your original contribution as the amount returned.

I'm going to submit to the moderators that this TurboTax behavior (not presenting the returned-amount page again for an excess Roth IRA contribution) is problematic.  This strikes me as something that they would consider for possible future improvement, but not as an immediate problem that they would fix in 2016 TurboTax.

[jonneff]

I'll give it a try

[dmertz]

Note that the amount to enter as the amount returned is the amount of your excess contribution, *not* the gross amount (which includes gains) distributed.

[jonneff]

Hmmmm,  That is what I did!!!   I said I contributed XXX and that I withdrew the same XXX.  So then how/were do I enter the taxable earnings that were earned between the time I contributed incorrectly, and when I withdrew the money?

[jonneff]

And what about th 1099-R 2017 data?  Do I forget about that or how do I enter that.  Just when I thought I understood how to correct this, now I am confused again.

[dmertz]

As my answer below indicates, the earnings are reported by entering into TurboTax the code JP 2017 Form 1099-R that you expect to receive.  Since there should be no tax withholding (having taxes withheld on the earnings makes reporting more difficult since the taxable amount is reportable on the 2016 tax return but the withholding is reportable on the 2017 tax return), the details of the Form 1099-R will not be submitted with your tax return, so the only things you need to enter accurately are boxes 1, 2a and 7.  To avoid TurboTax giving an error for missing information, you can guess at the payer's name and EIN.  Only the results on Form 1040 line 15, 59 and Form 5329 will appear as part of your 2016 tax return.

[jonneff]

So, if I understand you correctly, I still have to go through the work around, so that I can get to the 1099-R question and enter the JP 2017 code plus the earnings, etc, then correct the 10,000 amt b ack to XXX and I should be golden.

[dmertz]

A Form 1099-R is entered under Wages & Income (or Personal Income) -> Retirement Plans and Social Security -> IRA, 401(k), Pension Plan Withdrawals (1099-R), not under Deductions & Credits.