Tax Year 2022 Excess Roth Contribution- contributed and withdrawn exclusively in 2023 - how to report?

[bharris9]

I made a Tax Year 2022 Roth IRA contribution of $6000 in March 2023. While doing taxes, I realized I exceeded the income limit and withdrew the contribution + earnings before the tax filing deadline. The total was withdrawal was $6562.78 and I opted NOT to have any taxes taken out (Fed, State or early distrib).

In TT, I have correctly entered both my contribution ($6000) and excess contrib withdrawal ($6000).

My questions are:

1. Do I need to proceed with manually filling out a 1009-R for the $562 distribution on my current Tax Year 2022 Return? Or do I wait and report this on my Tax Year 2023 return in 2024? I realize I will have received my official 1099-R by that time as well.

2. In either case, which Year Printed 1099-R form will I be using? (2022, 2023, 2024)

3. Will I be using codes J and P? or J and 8?

Thank you!

[DanaB27]

Generally, a contribution made in 2023 for 2022 is deemed to have been made on the last day of 2022 (26 U.S. Code § 219 (f)(3)) and therefore you should get 2023 Form 1099-R in 2024 with codes P and J for the withdrawal of excess contributions and earnings since it was a contribution for 2022. But some financial institutions will issue Form 2023 1099-R with codes 8 and J in this situation since the contribution was made in 2023. 

In your situation, you might want to check with your financial institution and wait until you get Form 1099-R.

If you get a 2023 Form 1099-R in 2024 with codes P and J for the withdrawal of excess 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" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.

[Edited 4/16/2023 | 6:58 am PST]

@bharris9 

[bharris9]

Thanks DanaB27. Respectfully, I think this is in accurate. I have done more research and now spoken with multiple people who have confirmed that the "tax year" for which a Roth IRA contribution was made does not matter in the case of a distribution. The tax year return you report the 1099-R on should be the year "in" which you made the contribution.

In my case, even though my contribution was "for" tax year 2022, because I made the contribution "in" calendar year 2023 (and subsequently withdrew), I should be:

- reporting the 1099-R distribution on my tax year 2023 return (in 2024)

- using Form 1099-R 2023

- using codes J and 8 to indicate 2023 as the taxable year

To clarify (for others who may read), only if I had made tax year 2022 contributions "in" 2022 would I then need to report the distribution on my 2022 tax return. In that case, I would also use Form 1099-R 2023, but would use codes J and P to indicate 2022 as the taxable year.

Thanks

[bharris9]

Thanks @DanaB27. To close the loop on this:

I reached out to my financial institution (Vanguard) regarding the matter. They confirmed that b/c the excess contribution (now withdrawn) was made exclusively in 2023, the earnings from this (1099-R) will be reported as taxable income on next year's return (tax year 2023), not this year's return (tax year 2022).

Just to clarify this thread, my initial "Respectfully, I think this is in accurate" comment was in response to DanaB27's original response which outlined only the 2022 guidance. It has since been edited to account for 2023 reporting.