How can I amend Form 5329 for system issue with my 2021 tax return? The 2021 distributions from Roth IRA line item is blank even with 1099-R provided, causing incorrect excess carryover to 2022.

[rsyed]

I made excess contributions to a Roth IRA for 2020 tax year in 2020 and Jan 2021. I subsequently removed all excess contribution + earnings with penalty from Roth IRA in March 2021 and filed 1099-R form (with codes PJ) in my 2021 tax return.

However, I noticed my 2021 tax return generated by turbotax online has a blank entry for line 20 (2021 distributions from your Roth IRAs) in the auto generated Form 5329, which is resulting in line 22 (Prior year excess contributions) to be incorrectly set when this should be zero. Please advise on how this Form 5329 for 2021 can be amended now, as this seems to be an issue with how turbotax online is auto-generating Form 5329 based on 1099-R data input. The system should have detected the gross distribution from 1099-R and added this to line 20 in the auto-generated form 5329 instead of leaving this blank.

[DanaB27 · Accepted solution]

You will enter during the IRA contribution interview that you withdrew the 2020 excess contribution by the due date (to confirm both contributions were for 2020?). This will remove the penalty on Form 5329 from your 2020 tax return.

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Continue until the penalty screen and enter the excess contribution amount withdrawn (without considering earnings or losses).

Please see How do I amend my federal tax return for a prior year?

Please delete the excess contribution that was carried over to your 2021 and 2022 tax returns during the IRA contribution interview.

To confirm, you entered the 2021 Form 1099-R with codes P and J on your 2020 tax return because this was an excess contribution for 2020. A 2021 Form 1099-R with codes P and J won't do anything to your 2021 return because it belongs on your 2020 tax return.

Please see What happens if I made an excess Roth IRA contribution for additional information.

@rsyed

[rsyed]

@DanaB27 Correct, both contributions (made in 2020 and Jan 2021) were towards the 2020 roth IRA limit.

Regarding 1099-R I received 2 forms in Jan 2022 with year as 2021 on the forms. One has codes PJ with distribution+earning with early withdrawal penalty for excess contributed during 2020, the other 1099-R has codes 8J with distribution as the excess amount made in Jan 2021 toward the 2020 limit. Since all withdrawals from Roth and earnings income was received in 2021, I had only entered 1099-R data in my 2021 tax return since I received these forms in 2022.

Is below correct steps to resolve this issue:

1. My current 2020 tax return doesn’t have 1099-R or Form 5329. Do I amend 2020 return and just add the 1099-R form with PJ codes?
2. I had already indicated in my 2020 tax return that I withdrew the 2020 excess from roth by the due date In the Roth IRA contributions Worksheet with this return:
   1. Line 19 mentions total contribution and line 25 – contributions withdrawn by due date has total excess amount contributed listed
   2. Line 26: Excess Roth IRA contribution credit is also showing blank in above roth worksheet
3. Next, I need to amend 2021 tax return to only include the 1099-R which has the 8J codes and remove only the 1099-R with PJ codes from this return?

[DanaB27]

1)Yes, you would have to amend your 2020 return to include the 2021 Form 1099-R with code PJ.

2) It seems you entered it correctly.

3) No, you don’t need to amend your 2021 tax return. TurboTax knows that the 2021 Form 1099-R with code PJ doesn’t belong on the 2021 tax return because of the code P. Therefore, TurboTax won’t count the distributions (the only item it would pull from the form would be tax withheld which would belong on the 2021 return).

@rsyed