Roth excess

[robv10]

Put $6000 in Roth 12/15/22 and determined it was not a wise move as I had withdrawn money from my regular IRA earlier in 2022. I had Fidelity take it back out in Jan 2023 along with $174 in earnings that they calculated based on irs regulations. It does not appear like a new 1099R will be issued. How do I treat this in the Turbotax program when it asks about Roth contributions? My current 1099R only shows the contribution and not the money being taken back out or the $174.

[ThomasM125]

The best thing to do would be to report the distribution made in 2023 on your 2022 tax return. Otherwise, you will need to amend your 2022 tax return in 2024 when you get the form 1099-R reporting the distribution belonging in 2022. 

If you wish to report the earnings on your excess Roth IRA contribution distribution in the current year, you will need to make a substitute form 1099-R entry in Turbo Tax. Please follow these instructions:

1. Choose the Federal option on your left menu bar
2. Choose Wages & Income
3. Choose IRA, 401(k), Pension Plan Withdrawals (1099-R)
4. Choose the Financial Institution or other provider (1099-R) option
5. Enter your pension distribution information by completing a form 1099-R entry
6. Work through the section until you see a screen that says Do any of these situations apply to you? And check the box that says I need to file a substitute 1099-R 

You need to enter the distribution amount in box 1 and the earnings in box 2(a) and enter code "T" and "P" in box 7. Indicate that the Form 1099-R is for 2023.

[robv10]

What do I do about the current 1099R that only shows the $6000 distribution?

[fanfare]

you do not report the distribution on your 2022 tax return.

you should  include  the 174 dollars now on line 4b of your 2022 tax return.

that taxable amount of 174 will show on your 2023 1099-R as taxable in 2022.

Ignore the $6000.

@robv10 

[fanfare]

"What do I do about the current 1099R that only shows the $6000 distribution"

what current 1099 R? . you don't have that until Jan 2024.

[robv10]

I am sorry ...its not a 1099R its a 5498 for a Roth contribution. Its for 2022 because the contribution happened in Dec. 2022 and the money was taken back out in Jan. 2023. Also since its a 5498 and not a 1099R does the previous advice still stand? Sorry for the confusion.

[DanaB27]

Yes, you would still have to enter the distribution for the return of contribution and earnings on your 2022 tax return. But only the earnings would be taxable.

You will get a 2023 Form 1099-R  in 2024 with codes P and J for the return of contributions and earnings. This 1099-R will have to be included on your 2022 tax return and you have two options:  

• You can wait until you receive the 2023 Form 1099-R in 2024 and amend your 2022 return or
• You can report it now in your 2022 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 2023 Form 1099-R into the 2023 tax return since the withholdings are reported in the year that the tax was withheld. The 2023 code P will not do anything to the 2023 tax return but the withholdings will be applied to 2023.

To create a Form 1099-R in your 2022 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2022?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter J and P
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2023 Form 1099-R.
11. Click "Continue" after all 1099-R are entered and answer all the questions.
12. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" if you are over 59 1/2 (if you are under 59 1/2 and removed the excess after December 29, 2022, then enter it next to "Corrective Distributions made on or after December 31, 2022")

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2021" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.

To verify this is a 2022 Form 5498? Because usually, you get it at the end of April/May after all contributions have been processed and a 2022 Form 5498 shows IRA contributions for 2022 you made in 2022 and through April 18, 2023. You do not need to enter Form 5498 in your tax return. Please see What Is IRS Form 5498? for additional information.

[Edited 2/15/2023 | 6:30 am PST]

@robv10

[fanfare]

The return of contribution does not go on your tax return, only the earnings.