Using Turbo Tax how do I report an excess 2020 contribution to a roth? And how do I report the correcting corresponding excess removal made in Feb. 2021?

[ThomasM125]

You wouldn't have to enter the contribution on your 2020 tax return if you withdrew the funds by the due date of the tax return. You should receive a form 1099-R with code 8 in box 7 that will indicate that it is a return of excess contributions, so it won't show as taxable on your tax return.

You will need to enter any income earned on the money as taxable income on your tax return, in the appropriate category (interest, dividends, capital gain, etc.)

[kelleyinman]

Thank you,

The earnings  on those funds was also transferred out of the Roth in the 2020 Excess removal in Feb. 2021.

Do I report those earnings on my  2020 or 2021 return?

I was told I need to include a letter of explanation on those earnings to the IRS. 

((Maybe because I have no paperwork (1099-R) from my broker on those earnings until 2022?? ))

How do I create that letter in Turbo Tax?

Because I am under 59 1/2 years old, I also need to fill out form 5329.

Do I do that for 2020 or 2021 returns?

How do I fill out that form in Turbo Tax?

Thanks for your continued guidance.

[scottretired]

Thank you,

Can you please answer these few follow-up questions:

The earnings  on those funds was also transferred out of the Roth in the 2020 Excess removal in Feb. 2021.

Do I report those earnings on my  2020 or 2021 return?

I was told I need to include a letter of explanation on those earnings to the IRS. 

((Maybe because I have no paperwork (1099-R) from my broker on those earnings until 2022?? ))

How do I create that letter in Turbo Tax?

Because I am under 59 1/2 years old, I also need to fill out form 5329.

Do I do that for 2020 or 2021 returns?

How do I fill out that form in Turbo Tax?

Thanks for your continued guidance.

[DanaB27]

Turbo Tax will ask you to "Explain the Return of Contribution" and create that statement for you when you enter the 1099-R. TurboTax will create Form 5329 for you as well.

You will get a 1099-R 2021 in 2022 with codes P and J for the removal of the excess contribution and earnings. This 1099-R will have to be included on your 2020 tax return and you have two options: 

• You can wait until you receive the 1099-R  2021 in 2022 and amend your 2020 return or
• You can report it now in your 2020 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 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 tax return but the withholding will be applied to 2021.

To create a 1099-R in your 2020 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-R”
3. Click on “Jump to 1099-R”
4. Select "I'll type it in myself"
5. Box 1 enter total distribution (contribution plus earning)
6. Box 2 enter the earnings
7. Box 7 enter P and J 
8. On the "Which year on Form 1099-R" screen say that this is a 2021 1099-R.
9. Continue through the questions
10. After entering all 1099-R click "continue" until you get to the "Explain the Return of Contribution" screen and enter that you returned excess contributions and earnings

[Tim Tam]

Hey DanaB27,

I found your reply to be the most helpful. 

I'm in a similar situation, except I have a traditional IRA that I removed an excess contribution with earnings from, but won't receive my 1099-R until 2022.

Should I be checking the "IRA/SIMPLE/SEP box is checked"?

Thanks,

TT

[fanfare]

IRS Pub 590A tells you how to handle this and any other situation you can imagine.