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hwther24244
Returning Member

Made an Excess Roth IRA Contribution for Year 2020 in Year 2021.

I made an overcontribution to my Year 2020 Roth IRA. I didn't contribute into Roth IRA until April of this year 2021(4/16/21) after I filed 2020 taxes on 4/11/21. I also maxed contributed $6000 for Year 2021 the same time I contributed for Year 2020.

 

I didn't catch this because my 2020 AGI was different from Earned Income(only worked in December 2020 which is first job) and I just mistakenly contributed the AGI number. I over contributed by $713.43. I opted for a distribution of the contributions and earnings on those contributions at Vanguard . Vanguard this week(August 17, 2021) gave me back the $713.43 and another that is $41.81. I opted to withhold taxes for Fed(10%) and State(10%)(California) which would be $5.23 for both. So does this mean my total earnings is $52.27 right or is it just $41.81? And I pay 10% penalty on this $52.27 amount.

 

I read since I withdrew excess/earnings before October 15th, I need to amend 2020 tax to report earnings, but I'm stuck at this point since Vanguard won't give Tax Forms until 2022. Do I just add the earnings($52.27 or $41.81) on the 2020 1040X or I have to file a 2020 1099R and add the $52.27/$41.81 on Box 1? Also for the 1099r I don't have payer tax IDs, EIN, and addresses yet until 2022 so would it be Ok to leave it blank? Same for distribution code as I won't know until 2022.

 

Someone also told me this in the bottom and wonder if it's true that I don't have to amend 2020 return:

Spoiler

The returned earnings are taxable in the year in which (not for which) you made the excess contribution. So if you made the excess 2020 contribution in 2021, the returned earnings are taxable in 2021. So it sounds like you do not need to amend your 2020 return.

The withholding is treated as a credit on your taxes in the year it was withheld, regardless of the year for which you made the correction. So, money withheld in 2021 will appear on your 2021 return.

3 Replies
macuser_22
Level 15

Made an Excess Roth IRA Contribution for Year 2020 in Year 2021.


@hwther24244 wrote:

I made an overcontribution to my Year 2020 Roth IRA. I didn't contribute into Roth IRA until April of this year 2021(4/16/21) after I filed 2020 taxes on 4/11/21. I also maxed contributed $6000 for Year 2021 the same time I contributed for Year 2020.

 

I didn't catch this because my 2020 AGI was different from Earned Income(only worked in December 2020 which is first job) and I just mistakenly contributed the AGI number. I over contributed by $713.43. I opted for a distribution of the contributions and earnings on those contributions at Vanguard . Vanguard this week(August 17, 2021) gave me back the $713.43 and another that is $41.81. I opted to withhold taxes for Fed(10%) and State(10%)(California) which would be $5.23 for both. So does this mean my total earnings is $52.27 right or is it just $41.81? And I pay 10% penalty on this $52.27 amount.

 

I read since I withdrew excess/earnings before October 15th, I need to amend 2020 tax to report earnings, but I'm stuck at this point since Vanguard won't give Tax Forms until 2022. Do I just add the earnings($52.27 or $41.81) on the 2020 1040X or I have to file a 2020 1099R and add the $52.27/$41.81 on Box 1? Also for the 1099r I don't have payer tax IDs, EIN, and addresses yet until 2022 so would it be Ok to leave it blank? Same for distribution code as I won't know until 2022.

 

Someone also told me this in the bottom and wonder if it's true that I don't have to amend 2020 return:

Spoiler

The returned earnings are taxable in the year in which (not for which) you made the excess contribution. So if you made the excess 2020 contribution in 2021, the returned earnings are taxable in 2021. So it sounds like you do not need to amend your 2020 return.

The withholding is treated as a credit on your taxes in the year it was withheld, regardless of the year for which you made the correction. So, money withheld in 2021 will appear on your 2021 return.


The returned earnings are taxable in the year that the contribution was *for*, not returned - 2000.     You will receive a 2021 1099-R with a code JP in box 7 that must be reported on an amended 2020 tax return.   The earnings will be in box 2a.

 

It makes no sense to have tax withheld on a return of contributions since the tax withheld (1099-R box 4) applies to the year withheld - 2021.     You must enter the 1099-R in both an amended 2020 tax return and your 2021 tax return.    The code JP will do nothing on a 2021 tax return  but the box 4 withholding will be credited to you.

 

There is no point to amend 2020 until you receive the actual 1099-R, probably in January, 2022.  Only the box 2a (earnings) will be taxable.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
hwther242441
New Member

Made an Excess Roth IRA Contribution for Year 2020 in Year 2021.

@macuser_22 

So the only thing to fill out on 2020 1099-R is box 2a and box 7 with code JP? And for the tax withheld(Box 4/Box 14) it would only be reported on 2021 1099-R rather than 2020 1099-R correct? Also what is Gross Distribution; do I report that on both 2020/2021 1099-R or just 2021 1099-R? I'm also wonder would I still be able to E-File an Amended 2020 Return in 2022(I E-filed 2020 taxes) or do I have to mail it in.

macuser_22
Level 15

Made an Excess Roth IRA Contribution for Year 2020 in Year 2021.


@hwther242441 wrote:

@macuser_22 

So the only thing to fill out on 2020 1099-R is box 2a and box 7 with code JP? And for the tax withheld(Box 4/Box 14) it would only be reported on 2021 1099-R rather than 2020 1099-R correct? Also what is Gross Distribution; do I report that on both 2020/2021 1099-R or just 2021 1099-R? I'm also wonder would I still be able to E-File an Amended 2020 Return in 2022(I E-filed 2020 taxes) or do I have to mail it in.


You enter the entire 1099-R  exactally as sent into both 2020 and 2021.   TurboTax knows what to do with the code JP to enter it correctly for each tax year (for 2020 the box 1 gross distribution will go on the 1040 line 4a and the box 2a earnings on line 4b, the 2021 box 4 tax withheld will be added to other W-2 and 1099 withholding on the 2021 tax return line 25b .     You cannot e-file an amended 2020 tax return after Oct, 15, 2021 which will be before the 1099-R is received - 2020 e-file ends on that date to get ready for next year.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

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