I made an excess IRA contribution in 2020. I've requested my broker to remove the excess plus gains. Where in TT do I enter this gain without a 1099-R?

[trekmanone]

I made excess IRA contribution in Nov 2020. I asked my broker to remove the excess plus gain. It is now March 2021. 1099-R will be issued next year 2022. I know what the removed taxable gain is but there is no 1099-R to report it. How do I report this gain as taxable income in TT?

[macuser_22]

Traditional or Roth IRA?

[trekmanone]

Traditional IRA.

[macuser_22]

*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 IRA distribution - then:

You can just report it now and ignore the 2021 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 P will not do anything in 2021 but the withholding will be applied to 2021.

You would enter the 2021 1099-R with the total distribution in box 1 (contribution plus the earnings),

The earnings in box 2a,

Check the IRA/SEP/SIMPLE box.

Enter code "P" in box 7 - don t worry that it will say "taxable in 2019 "

Enter code "1" in box 7 if under age 59 1/2 (lower box 7).

On the "Which year" screen say that this is a 2021 1099-R.

After the 1099-R summary screen press continue.


Enter the explanation for the excess contribution and that you are reporting a 2021 1099-R on your 2020 tax return to avoid having to amend in 2021.

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.

[EDITED to change years for 2020]

[trekmanone]

The excess IRA contribution was made in tax year 2020.
The gain/loss, on the excess contribution, HAS to reported in the tax year it occurred, i.e. 2020 return. My broker WILL NOT issue the 1099-R until the following tax year, 2022. However, when funds are removed from my IRA, broker will show the excess contribution removed PLUS the gains in tax year 2021. These gains have to be reported for 2020 tax return. IN 2022 a follow on 1099-R will be reported for 2020.
Where in TT do I report these gains as taxable income? I do not and will not be issued a 1099-R. The broker will issue the 1099-R in 2022 with a P.
I appreciate your help but you keep referring to a 1099-R. A broker cannot report a 1099-R after the close of the tax year.
So in conclusion, I need to report the taxable gain on my 2020 return without a 1099-R being issued. My major broker said the 2022 1099-R will show the excess contribution + gain with a P. IRS will see the gains reported in 2020 as taxable income and the excess contribution which is not taxable and the 2 will coordinate.

[trekmanone]

In TT, I checked I do not have a 1099-R and it led me to a substitute 1099-R where I entered taxable income section. I just am not sure this is the right method so as to coordinate with the actual 1099-R issued in 2022 for the 2020 excess contribution + gains. It's where to report the gains without a 1099-R is what is dogging me...

[trekmanone]

Sorry. This substitute 1099-R TT method issues a form 4852 with the taxable gain shown as taxable gross distribution.

[macuser_22]

Nothing was said about a "substitute" 1099-R which is not appropriate.   A substitute  (form 4852) is used to *correct* a defective 1099-R that you *received* and the issuer refused to correct.    You do not have a 1099-R to substitute for.

You are just entering an *original* 1099-R early that is all.

If you are not comfortable doing that, then just wait for the real 1099-R next year, and then amend 2020 to report it.    Entering it early just saves the trouble of amending next year.

[trekmanone]

Hi Champ,

Well I received both my 1099-Rs for excessive IRA contributions from Fidelity.
Recap:
I made a 2020 excessive IRA contribution and a 2021 excessive IRA contribution. Fidelity removed excess plus gains from both years simultaneously. 
This year, 2022, I am filing my 2021 taxes with both IRA excessive contributions, both state year 2021. One 1099-R has box 7 with code 8 (2021) and one 1099-R has box 7 with code P (2020). Fidelity rep stated I can file both together in the same year as box 7 has the two tax years taken into account.
However, TT Premier online-only recognizes the 1099-R with code 8.
How do I get TT to recognize both 1099-Rs with differing box 7 codes? There are taxable gains in both years so I should pay taxes taxes on the total of the two, not just one.
Thoughts?

[DanaB27]

You will have pay taxes on the earnings in the year you made the contribution for. Therefore, the 2021 Form 1099-R with the code P belongs on our 2020 return. 

If you had created the Form 1099-R when you filed your 2020 tax return as macuser_22 had suggested then you can ignore the Form 1099-R with code P unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2021 Form 1099-R with code P into the 2021 tax return since the withholding is reported in the year that the tax was withheld. The 2021 code P will not do anything to the 2021 tax return but the withholdings will be applied to 2021.

If you didn't create Form 1099-R with code P on your 2020 tax return then you will have to amend your 2020 tax return to report the Form 1099-R with code P.

@trekmanone

[Edun]

I have similar situations for both Traditional IRA for my husband and Roth IRA for myself.  Both in 2020. 

Would both of these ROTH and TRAD IRAS  be handled the same way as in your description? 

Excess contributions of $78 plus interest $15 on Traditional IRA. 

& Excess contribution of $254 plus interest $86 on Roth.

These amounts were all withdrawn prior to filing 2020 taxes,  we received the 1099-Rs So I plan to amend our 2020 taxes. 

Does it matter that My husband is 72- Trad IRA?

Or that I'm 58 -Roth?

AND Because I didn't learn last year we did the SAME thing for 2021.

I will withdraw the overages, and create a 1099-R...

Again is it handled the same way for Roth and Traditional IRAs..

THANKS!!

[fanfare]

@Edun 

For your Roth you must consider the 5-year rule.

TurboTax is supposed to handle all this for you if your Roth history is exactly correct in TurboTax.

[halst6]

Hi Dana,

What is the difference between code 8 and code P?

[trekmanone]

Thanks Dana,

As I said, I received both 1099-R's from Fidelity but each had a different code. I paid taxes on the one with code P and no tax on the other. TT and IRS seemed to be okay with everything. Whew!

Thank you all for your constructive feedback. 

The moral of this story is; do not make tax-deferred IRA, Roth or HSA contributions if you are not working, i.e. no earned income. My DIY mistake.

[LindaS5247]

The Codes for Box 7 of your Form 1099-R as follows:

P – Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2021

8 – Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2022

(Code 8 indicates that the amount is taxable in the tax return you are currently working on, and Code P indicates the amount is taxable in the prior tax year.) See IRS Form 1099-R Instructions for Code P for more information.

Click here for the IRS Instructions for Form 1099-R.

Click here for form 1099-R codes for Box 7.