Made $5,500 2015 Roth IRA contribution but am ineligible due to income. In Jan 2016 withdrew the entire contribution which is less than $5,500. (No earnings, only loss)

[smashedpumpkins]

Through Vanguard I made a $5,500 2015 Roth IRA contribution during 2015 but later learned that I am ineligible due to income requirements. In Jan 2016 I withdrew the entire contribution which is less than $5,500. (No earnings, only loss) In January 2016 Vanguard would have already reported the 2015 contribution to the IRS. And now next year (Jan 2017) Vangaurd will report a withdraw from the Roth IRA from January 2016.

How do I tell the IRS that I withdrew the incorrect Roth IRA 2015 contribution? (Vanguard won't report it until next year because the withdraw was in Jan 2016)
How do I tell the IRS next year (Jan 2017) to ignore the Vanguard withdraw notification?
Will Turbotax be able to catch all this?

Thank you!

[PatriciaV · Accepted solution]

Yes, TurboTax will help you report the excess contribution and the subsequent withdrawal.

If you contribute too much to your IRA, you will be taxed 6% on your contribution that has exceeded the limit. Any contribution withdrawn on or before the return filing due date, which includes extensions, is treated as if it were not contributed. This treatment only applies if any earnings on the contributions are also withdrawn. The earnings are considered earned and received in the year the excess contribution was made and are taxable.

After you enter your Roth IRA Contributions, TurboTax will ask how much of the excess contribution you will withdraw before the due date of your tax return so the appropriate adjustment can be made.

[rs14]

Unfortunately, I have similar situation, but I cant seem to get Turbo Tax reset itself so I can correctly enter these withdrawals.  I hope I don't have to redo my taxes to get this right!
When I fo and enter 5500 as 2015 contribution made AND $2960 to be withdrawn in February, Turbo tax does not seem to ask me those questions I saw the first time!