Roth IRA Excess Contribution Smart Check

[bla22]

Hi, while doing my taxes I realized I made an excess contribution of $4200 for 2023, so I withdrew the excess, along with the Fidelity-calculated earnings, for a total withdrawn amount of $4392. I'm having an issue where the Smart Check at the end is saying "IRA Contributions Worksheet: Line 25 - Taxpayer's excess Roth IRA Contribution withdrawn should not be more than $4200". I was told I need to withdraw the original contribution amount along with earnings, but TurboTax is saying I can't withdraw more than what I contributed. How do I fix this error? 

[DanaB27]

You will only enter the contribution amount as withdrawn on the penalty screen during the interview:

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 Continue until the penalty screen and enter the excess contribution amount withdrawn ($4,200).

You will get a 2024 Form 1099-R  in 2025 with codes P and J for the withdrawal of the 2023 excess contributions and earnings. This 1099-R will have to be included on your 2023 tax return and you have two options:  

• You can wait until you receive the 2024 Form 1099-R in 2025 and amend your 2023 return or
• You can report it now in your 2023 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 2024 Form 1099-R into the 2024 tax return since the withholdings are reported in the year that the tax was withheld. The 2024 code P will not do anything to the 2024 tax return income but the withholdings will be applied to 2024.

To create a Form 1099-R in your 2023 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 2023?"
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 2024 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 "Corrective distributions made before the due date of the return".

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2022" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2023.

[bla22]

Thank you so much for the detailed response! 

[dmertz]

The amount of contribution that you had returned was $4,200, not $4,392.  $4,392 was the gain-adjusted amount distributed.

Go back to where you told TurboTax how much contribution was returned (IRA Contribution Worksheet line 25) and enter $4,200.