Dealing with an excess Roth IRA contribution that lost value before being withdrawn.

Forum|Forum|4 years ago
April 6, 2022
1 reply
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I had an excess contribution in 2021 which I have worked to get withdrawn. The account lost value between the deposit and withdrawl so the amount I got back was less than what I deposited.

When TurboTax asks me for the excess amount withdrawn, do I enter what I originally contributed or what was returned to me after the losses?

(I'm worried if I enter what I was actually returned it won't calculate that the entire excess contribution was undone.)

Thank you!

TurboTax Self Employed Online

Best answer by DanaB27

You will enter the originally contributed excess (without losses or earnings) on the penalty screen during the IRA contribution interview.

If you withdrew the excess in 2022 you will get a 2022 Form 1099-R in 2023 with codes P and J for the withdrawal of excess contribution and loss. This 1099-R will have to be included on your 2021 tax return but won't be taxable since you had no earnings and you have two options:

You can wait until you receive the 2022 Form 1099-R in 2023 and amend your 2021 return or
You can report it now in your 2021 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2022 Form 1099-R into the 2022 tax return since the withholding is reported in the year that the tax was withheld. The 2022 code P will not do anything to the 2022 tax return but the withholdings will be applied to 2022.

To create a Form 1099-R in your 2021 return please follow the steps below:

Login to your TurboTax Account
Click on the "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Answer "Yes" to "Did you get a 1099-R in 2021?"
Select "I'll type it in myself"
Box 1 enter total distribution (contribution minus loss)
Box 2a enter $0
Box 7 enter J and P
Click "Continue"
On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.

DanaB27Answer

Level 15

You will enter the originally contributed excess (without losses or earnings) on the penalty screen during the IRA contribution interview.

You can wait until you receive the 2022 Form 1099-R in 2023 and amend your 2021 return or
You can report it now in your 2021 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2022 Form 1099-R into the 2022 tax return since the withholding is reported in the year that the tax was withheld. The 2022 code P will not do anything to the 2022 tax return but the withholdings will be applied to 2022.

To create a Form 1099-R in your 2021 return please follow the steps below:

Login to your TurboTax Account
Click on the "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Answer "Yes" to "Did you get a 1099-R in 2021?"
Select "I'll type it in myself"
Box 1 enter total distribution (contribution minus loss)
Box 2a enter $0
Box 7 enter J and P
Click "Continue"
On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.

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TorchwoodAuthor

Level 2

Thank you - this makes perfect sense! I would greatly prefer to enter the 1099-R info now using the figures I have so I'm going to choose that option.

One other question: my 2021 excess contributions were spread across 2021 and early 2022. When I received the withdrawal, it was send in two parts (I believe one was for the 2021 excess and one for the 2022 excess).

Will these be combined on a single 1099-R when I receieve that latee this year or would I need to enter them individually since they were returned in two separate transactions?

DanaB27

Level 15

The withdrawal of the excess contribution for 2021 (even when made in 2022) removed in 2022 will be reported on a 2022 Form 1099-R with codes P and J.

If you had an excess made for 2022 and remove in 2022 then you should get another 2022 Form 1099-R with code 8 and J. This would go on your 2022 tax return.

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