What/how do I report a removal of excess Roth IRA contribution made in 2018?

[pcarlson9]

@dmertz 

No I have never had to file 5329. I only contribute $600 a year to my Roth and the part time job income always more than exceeded it.  2020 was the end of that job so only ended up with $456 in income.

I did go back and look at my 2019 return to be sure and no 5329 exists.

I'll go back to TT after the entry of the 1099-R and go through it line by line and see if I can find where it asks that question.

[pcarlson9]

@dmertz 

I have gone through the TT questions 2 times now and am never asked if I made Excess contributions prior to 2020.

However I was looking through the codes for box 7 on the 1099-R and the TT explanations for them says: "P – Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2019".

Is it the P in box 7 that is generating the incorrect info on 5329? Something that got missed in being updated in TT?

[dmertz]

Entry of the Form 1099-R itself has nothing to do with it.  Code P simply means "taxable on the tax return for the year prior to the year of the Form 1099-R," but 2020 TurboTax's drop-down text just assumes that you are entering a 2020 Form 1099-R.

Proceed through the Traditional and Roth IRA Contributions section indicate that you have a Roth IRA, indicate that you opened a Roth IRA before 2020, then correct whatever is shown as the amount of your excess Roth IRA contributions for prior years.

[pcarlson9]

@dmertz 

The problem seems to be with TT not updating the program code for the 5329 for 2020. P is telling the program it is a 2019 excess contribution instead of a 2020 excess contribution. Until they correct the program code this will keep happening. I was on the phone with them last nite and they are suppose to be working on it.

I found others who have encountered the problem in the discussion boards.

[dmertz]

There is nothing wrong with TurboTax with respect to selecting code P for the box-7 selection.   If in the follow-up to selecting code P you tell TurboTax that it the Form 1099-R is a 2021 Form 1099-R, which you said that you did, TurboTax will treat code P as meaning taxable in 2020.  The $13 of gains will appear on Form 5329 Part I resulting in a $1 early-distribution penalty, but nothing about the entry of this Form 1099-R will produce an entry on Form 5329 Part IV.  If you delete the this 1099-R from TurboTax, I'm confident that it will not cause any change to the reporting on Form 5329 Part IV.  Whatever is causing 2020 TurboTax to produce an excess-contribution penalty on Form 5329 Part IV is coming from some other entry you have made in TurboTax.

[macuser_22]

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@pcarlson9 wrote:

@dmertz 

The problem seems to be with TT not updating the program code for the 5329 for 2020. P is telling the program it is a 2019 excess contribution instead of a 2020 excess contribution. Until they correct the program code this will keep happening. I was on the phone with them last nite and they are suppose to be working on it.

I found others who have encountered the problem in the discussion boards.

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TurboTax is correct as it is.

Code P advances the year by a 1 every year.   For a 2020 1099-R with a code P it means taxable in 2019, for a 2021 1099-R code P, it means taxable in 2020.   That is why TurboTax has a screen that asks which year the 1099-R is for.  When you choose 2021 it becomes taxable in 2020 and the 1099-R box 2a amount will go on the 2020 1040 line 4b.

[pcarlson9]

@macuser_22 

I did indicate the 1099-R was for 2021.

[pcarlson9]

@dmertz 

Yes I found it!

I  had put the 144 in as a Roth contribution for a Prior Year. My mind was thinking this is 2021 and 2020 is a Prior year, instead of I'm working the 2020 return and that would make 2019 the prior year.

Part I of 5329 is now the only place numbers show up and the $13 shows as the taxable portion of my Roth Distribution on the 1040.

Thank you for your patience and help!

[aclsmb1smbacl]

@dmertz 

Thank you for the information!  As a follow up question, when I do eventually get an official 2021 1099-R in January 2022 for the $32.00 excess contribution + earnings withdrawal, will I still need to enter the 2021 1099-R data in the 2021 Turbo Tax?

Also, I found some old 1099-Rs for excess contribution withdrawals and saw some of those had codes of 8 & J.  What is the situation where 8 & J codes would be used instead of the P & J that  you have indicated is the proper code to use?  I only ask because the description for 8 (Return of Contribution Taxable in 2020) seems to make more logical sense to use as well.

[Cynthiad66]

Yes you can report the withdrawal of the excess contribution on your 2020  return.

1. Open (continue) return if you don't already have it open.
2. Inside TurboTax, search for 1099-R and select the Jump to link in the search results.
3. Answer Yes on the Your 1099-R screen,
4. Click on the box that you are creating a substitute 1099-R
5. Then select Continue.

The codes you will need for box 7 are J and P.

Since this is a Roth IRA the only amount that is taxable are any earnings on the excess contribution.

You will receive a 1099-R for the withdrawal in 2021 you do not need to report the information since you have reported it on your 2020 tax return.  per @DianeC958

[macuser_22]

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@aclsmb1smbacl wrote:

@dmertz 

Thank you for the information!  As a follow up question, when I do eventually get an official 2021 1099-R in January 2022 for the $32.00 excess contribution + earnings withdrawal, will I still need to enter the 2021 1099-R data in the 2021 Turbo Tax?

Also, I found some old 1099-Rs for excess contribution withdrawals and saw some of those had codes of 8 & J.  What is the situation where 8 & J codes would be used instead of the P & J that  you have indicated is the proper code to use?  I only ask because the description for 8 (Return of Contribution Taxable in 2020) seems to make more logical sense to use as well.

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If you report it now then you do not report it again when  you receive the 1099-R.

Code 8 means a 2020 returned in 2020, code P means a 2020 contribution returned in 2021.   Since the contribution was not returned until 2021 code P is correct.

[pcarlson9]

@dmertz 

I'm looking ahead to next years 2021 taxes. I've stopped any future contributions to my Roth, but had already made $100 in contributions for 2021 before stopping them. I really had no plans to get another part time job, but I don't want to have to deal with an excess contribution again next year if I can avoid it.

Since I am over 59 1/2  would taking a distribution now of $100 or more avoid that?

[dmertz]

If you have no supporting compensation, you'll need to obtain a return of contribution, not a regular distribution, of the $100 excess contribution that you've made for 2021.  If done in 2021 you'll receive a code 8J From 1099-R (easier to deal with than a code PJ 2022 Form 1099-R that you would eventually receive if you waited until 2022 to obtain the return of this contribution).

[pcarlson9]

@dmertz 

I'll just leave it there for now then and see where things stand around Dec 1, maybe my husband will get  a few hours of tutoring in yet this year that will be enough to cover it. If not I'll request a withdrawal before the end of the year.

Again Thank you

[krichards4]

Client reported incorrect excess Roth contribution of $600 on her 2019 tax return.  She paid the 6% penalty on her 2019 tax return, and now apply that $600 to her 2020 Roth contribution.  The problem is, the excess in 2019 was actually $650.  She paid the 6% penalty on the 600 but not the $50.  She did not withdraw and now apply the whole $650 as 2020 Roth contribution.  How do we remedy the penalty on the $50 that was not paid in 2019.  TTO not letting us force the form 5329 to enter the penalty.  Can we enter the $50 as taxable income for 2020, but still how to report the 6% penalty on the $50 for 2019?