How do I create a substitute or manual 1099-R to show removal of excess Roth contribution and earnings before I file my 2020 Tax return.

[USAFXXX]

Total Roth contributions for 2020 were $1,900where I contributed $1,000 in 2020 and $900 in 2021. I have two earnings figures, one for $82.79 belonging to $1,000 and taxable in 2020 and  $74.51 related to $900 and taxable in 2021. I need t way to disclose to IRA that I removed $1,900 in 2020 and report the $82.79 earnings for taxes and 10% penalty purposes.

[MinhT1]

You do not need to create a substitute 1099-R.

If you withdrew your 2020 excess contribution to your Roth IRA before the due date of the 2020 tax return, make sure that you also withdraw the related earnings.

On your 2020 tax return, do not report the excess contribution as it has been withdrawn. The earnings have to reported and taxed. These earnings are also subject to 10% early withdrawal penalty on form 5329.

The earnings on the 2021 excess contribution are to reported on your 2021 tax return.

When you receive the 2021 form 1099-R (in 2022) for this withdrawal, there is no further action needed.

[macuser_22]

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@USAFXXX wrote:
Total Roth contributions for 2020 were $1,900where I contributed $1,000 in 2020 and $900 in 2021. I have two earnings figures, one for $82.79 belonging to $1,000 and taxable in 2020 and  $74.51 related to $900 and taxable in 2021. I need t way to disclose to IRA that I removed $1,900 in 2020 and report the $82.79 earnings for taxes and 10% penalty purposes.

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You do not use a substitute because you do not have a defective 1099-R to substitute for.

This might require 1 or 2 1099-R's depending if the 2021 contribution was *for* 2021 or contributed in 2021 *for* 2020.     

If both were for 2020 then use a single 1099-R as below.

If the 2021 contribution was *for* 2021 then  that goes on your 2021 tax return next year. 

Earnings are taxed in the tax year that the contribution was for, not the year returned, if different years.

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.*IF* you requested a return of contributions due to an excess contribution and the excess was removed before the extended due date of the 2020 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 unless there is Box 4 Federal Tax withholding and/or box 12 State withholding. Then you must also enter the 2021 1099-R into the 2021 tax return since the withholding is reported in the year that the tax was withheld. The 2021 code JP will not do anything in 2020 but the withholding will be applied to 2021.

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 2019 "

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 2020 and not 2019

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 2021 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.

[USAFXXX]

Thank you and follow up question please. I am using Turbo Tax Online to file my 2020 Tax Return. I have already removed the $1,900 excess Roth contribution that belonged to contribution year 2020. Out of the total $1,900 I had contributed $1,000 on 11/20/2020 for year 2020 and $900 on January 15, 2021 for year 2020. My bank has removed the excess of $1,900 plus $82.78 in earnings (associated with $1,000 11/20/2020 contribution) and $74.59 in earnings (associated with $900 January 15, 2021 contribution.  I am getting confused on (1) Since I do not have the 1099R this transaction, how do I report to $82.78 earnings to be taxed in 2020 and $74.59 earnings to be taxed in 2021? You mentioned form 5329. Do I file taxes through TurboTax as normal and then manually send the form 5329 to IRS or can this 5329 be factored into my Tax return through Turbo Tax experience? 

[macuser_22]

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@USAFXXX wrote:

Thank you and follow up question please. I am using Turbo Tax Online to file my 2020 Tax Return. I have already removed the $1,900 excess Roth contribution that belonged to contribution year 2020. Out of the total $1,900 I had contributed $1,000 on 11/20/2020 for year 2020 and $900 on January 15, 2021 for year 2020. My bank has removed the excess of $1,900 plus $82.78 in earnings (associated with $1,000 11/20/2020 contribution) and $74.59 in earnings (associated with $900 January 15, 2021 contribution.  I am getting confused on (1) Since I do not have the 1099R this transaction, how do I report to $82.78 earnings to be taxed in 2020 and $74.59 earnings to be taxed in 2021? You mentioned form 5329. Do I file taxes through TurboTax as normal and then manually send the form 5329 to IRS or can this 5329 be factored into my Tax return through Turbo Tax experience? 

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As I said above, if the 2021 contribution was *for* 2020 then  the $74.59 is taxed in 2020 - the year that the contributions was for, not the year returned.

[USAFXXX]

Thank you and two follow up questions please. I have already removed $1,900 contributed amount plus 157.33 in earnings. (1) I am under 59 1/2. It's my understanding that $82.79 in earnings will be taxable in 2020 and $74.51 be taxable in 2021. Each amount subject to 10% penalty as well. My question is- would you agree that given my scenario I will need to address two 1099Rs one belonging to taxable earnings in 2020 and other one for 2021?  (2) How do I create 1099R through Turbo Tax and get routed to 1099R summary screen to allow me to enter comments? How does form 5329 form gets addressed through TurboTax.

Thank you again. 

Yousaf

[macuser_22]

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@USAFXXX wrote:

Thank you and two follow up questions please. I have already removed $1,900 contributed amount plus 157.33 in earnings. (1) I am under 59 1/2. It's my understanding that $82.79 in earnings will be taxable in 2020 and $74.51 be taxable in 2021. Each amount subject to 10% penalty as well. My question is- would you agree that given my scenario I will need to address two 1099Rs one belonging to taxable earnings in 2020 and other one for 2021?  (2) How do I create 1099R through Turbo Tax and get routed to 1099R summary screen to allow me to enter comments? How does form 5329 form gets addressed through TurboTax.

Thank you again. 

Yousaf

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I do not think you are understanding.

You have until the due date of the 2020 tax return (May 17, 2021) to make a 2020 IRA contribution.   Your 2021 contribution could either be a 2020 contribution  OR a 2021 contribution  depending on which year you asked the financial institution to apply it to - 2020 or 2021.      

How it is reported, depends on which year the contribution was for.  You have not said.

[USAFXXX]

The original Excess Roth IRA contribution that I had made was for 2020 and was for $1,900.  I had contributed $1000 in 2020 for 2020 and $900 in early 2021 for 2020. The original amount $1,900 plus the earnings already removed and moved to my personal account as of two weeks ago. Now I need to report the earnings to IRS so that I can be taxed and charged the 10% penalty on earnings. How do I report earnings to IRS as I file my 2020 Tax return through Turbo Tax Online without the 1099R? I am looking for specific steps please.  

[macuser_22]

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@USAFXXX wrote:

The original Excess Roth IRA contribution that I had made was for 2020 and was for $1,900.  I had contributed $1000 in 2020 for 2020 and $900 in early 2021 for 2020. The original amount $1,900 plus the earnings already removed and moved to my personal account as of two weeks ago. Now I need to report the earnings to IRS so that I can be taxed and charged the 10% penalty on earnings. How do I report earnings to IRS as I file my 2020 Tax return through Turbo Tax Online without the 1099R? I am looking for specific steps please.  

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I posted the steps above.

The total $2057.30 goes in box 1, and $157.30 in box 2a.    Code PJ in box 7.  The box 2a will be taxable in 2020.   Nothing at all goes on yiur 2021 tax return next year.

[USAFXXX]

Thank you for the steps. Do I need to list the financial institution information such as Vanguard, their address, and their TaxId as I complete the boxes of the 1099 R? 

[macuser_22]

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@USAFXXX wrote:

Thank you for the steps. Do I need to list the financial institution information such as Vanguard, their address, and their TaxId as I complete the boxes of the 1099 R? 

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Yes.   You are filing a real 1099-R early, however the information  is just to satisfy TurboTax to think that it is a real 1099-R because nothing other then the 1040 line 4  information goes to the IRS.    The "form" you enter is just a data entry screen and not a 1099-R form.

(The only time that the 1099-R information goes to the IRS is for there is tax withheld in box 4 on the 1099-R).

[USAFXXX]

This makes sense. I am below 59 1/2 age and earnings subject to 10% penalty. I assume that once I complete the 1099R as per your steps, Turbo Tax will account for 10% penalty automatically. Also I did not see a place where I can enter comments to explain the excess withdrawal and as to why I am completing the 1099R during tax filing experience. I just want to make sure that after I do the 1099R step and follow rest of the instructions on Turbo Tax, there’s nothing else needed such as completing any manual forms for the excess reporting. 

[macuser_22]

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@USAFXXX wrote:

This makes sense. I am below 59 1/2 age and earnings subject to 10% penalty. I assume that once I complete the 1099R as per your steps, Turbo Tax will account for 10% penalty automatically. Also I did not see a place where I can enter comments to explain the excess withdrawal and as to why I am completing the 1099R during tax filing experience. I just want to make sure that after I do the 1099R step and follow rest of the instructions on Turbo Tax, there’s nothing else needed such as completing any manual forms for the excess reporting. 

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Yes the 5329 should be automatic.  You do not explain a code PJ - the code explains it.

[moon8]

How should this question on the substituted 1099R on turbotax be answered? Is it checked or unchecked?

The IRA/SEP/SIMPLE box is checked on my copy of the 1099-R

[macuser_22]

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@moon8 wrote:

How should this question on the substituted 1099R on turbotax be answered? Is it checked or unchecked?

The IRA/SEP/SIMPLE box is checked on my copy of the 1099-R

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If you received a 1099-R with the IRA box checked then it is a NOT a Roth IRA.   That box is only checked for a Traditional IRA and box 7 should only be a code P.