Can't access "Extra Tax on Early Retirement Withdrawals" page

[minipele8]

I accidentally over-contributed to my Roth IRA in 2019. I removed the excess in 2020. I was told by someone at Vanguard that I should pay the penalty with my 2019 return, even though I won't receive a 1099-R until next year. I assumed I'd need to enter this info on the "Extra Tax on Early Retirement Withdrawals" but it won't let me visit this page... it just refreshes the current page I'm on. Any thoughts on this?

[macuser_22 · Accepted solution]

You were told wrong.   You would only pay the  6% penalty if the excess is not removed by Oct 15, 2020.  You do not have to do anything for 2019 now, but you will have to amend 2019 in 2021 after you receive the 1099-R.   You can avoid amending if you know the following information.

*IF* you requested a return of contributions due to an excess contribution and the excess was removed before the extended due date of the 2019 tax return and the earnings were also returned and you know that the IRA custodian will report this as a return of contribution and not as a normal Roth distribution but as a return of contribution with a code "JP" in box 7 - then:

You can just report it now and ignore the 1099-R when it comes.

You would enter the 1099-R with the total distribution in box 1 (the contribution plus the earnings),

The earnings in box 2a,

Enter code "P" in box 7 (Top) - don t worry that it will say "taxable in 2018 "

Enter code "J" in box 7 (Bottom).

On the "Which year" screen say that this is a 2020 1099-R. - That makes it taxable in 2019 and not 2018

After the 1099-R summary screen press continue.

If you are over 59 1/2 then on the "Lets see if we can lower your tax bill" enter the box 2a amount in the "Another Reason" box to eliminate the 10% early withdrawal penalty on the earnings.

Enter the explanation for the excess contribution and that you are reporting a 2020 1099-R on your 2019 tax return to avoid having to amend in 2020.

The box 2a earnings will be taxable income reported on line 4b on the 1040 form and if under age 59 1/2 will also be subject to a 10% penalty on a 5329 form that will be reported on line 59 on the 1040 Schedule 4 form.

[minipele8]

Thanks for the reply! Just to clarify the taxes/penalties that I owe...

• I pay taxes on the gains from excess contributions that were removed via the 1099-R that I receive next year
• I pay a 10% penalty for early withdrawal (since I'm under 59 1/2) via the 5329 next year

Is that all I need to worry about?

Thanks again!

[macuser_22]

Almost correct.  You pay the 10% penalty for early withdrawal  this year - 2019.

[macuser_22]

If you got a email with my "correct" post - I edited it to say "almost correct".

[minipele8]

Okay, so I pay it on my 2019 tax return, but should wait til 2020 and amend my 2019 return once I receive the 1099-R?

[macuser_22]

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@minipele8 wrote:

Okay, so I pay it on my 2019 tax return, but should wait til 2020 and amend my 2019 return once I receive the 1099-R?

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As my earlier post said, IF you know the amount returned and earnings then you can enter a "dummy 1099-R" as if you already received it and ignore the real 1099-R when it comes in 2021.   That will avoid having to amend 2019 as long as the dummy 1099-R matched the real one when it comes.

OR If you prefer, just don't do anything now for 2019 and amend 2019 when the 1099-R arrives - your choice.

[minipele8]

Gotcha. Thanks so much for all the info!