Excess Roth IRA contribution and 1099R with code PJ

[monstera13]

My story is a little complicated. I accidentally recharacterized $6000 from Trad to Roth IRA in 2021 and found out about that only in 2023. So I amended my tax return for 2021 and paid 6% penalty on excess contributions for each year 2021 and 2022.

I requested the withdrawal of excess contributions from Roth IRA later in 2023. The investment of $6000 had lost its value to 5400 and it was withdrawn from the brokerage. I additionally took $ 600 distribution from Roth IRA so that a total of $6000 would be removed from the Roth IRA and I would not have to pay any more penalties for 2023.

I received two 1099R this year; one with $600 in box 1 and code J and other with 5400 in box 1 and code PJ . Here is the problem; when I upload both 1099R TurboTax generates 5329 with only 600 removed from excess contribution and is asking to pay fine on remaining 5400. How do I fix this?

Thanks in advance. 

[fanfare]

"I requested the withdrawal of excess contributions "

This is the wrong action. Custodian should have refused it.

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after tax due date including extensions: you distribute the excess amount being carried forward on 5329,
(or offset it with currently allowed contribution) .
Earnings stay in the Roth account.

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Taking out an additional $600 was also an error.

you now have an early distribution from your Roth IRA.

It may be non-taxable if you still have basis in Roth contributions or conversions.

Yout are not answering the questions correctly about what you did or tried to do.

@monstera13 

[fanfare]

TurboTax won't apply a "P"1099-R to your current tax return. 

You should tell TurboTax you had a prior excess of $6,000 and you took out $6,000.

That will give the desired result but ignoring any tax consequence of the other 1099-R.

@monstera13 

[monstera13]

Thanks for your input. The custodian didn’t have any issue with withdrawing excess contribution. Anyway additional $600 was withdrawn to make the total amount withdrawn to $6000 so that I wouldn’t have to pay 6% penalty on excess contribution.

I can get it fixed if I manually put in for 1099R with total of $6000 in box 1 and distribution code J instead of PJ. Is that the way to go ?

[DanaB27]

Since you withdrew the excess contribution after the due date the financial institution should have only issued a Form 1099-R for a regular distribution with code J. Using code P and J for a 2021 excess contribution removed in 2023 is wrong. 

Yes, when you know that the incorrect code was used and the financial institution refuses to correct it then you can correct the code. You should inform the financial institution that they used the wrong code.