Repayment of Retirement Distribution

[squidlady]

Hello, I am over 60 and self-employed. I usually deposit $5000 into my Roth IRA every January, which I did in January 2021. In late 2020, my husband sold a rental property and that profit bumped our income up so that I was forced to take a $2000 withdrawal from that IRA last year when I was doing our 2020 taxes. In other words, our income was too large for me to be able to make that full $5000 contribution for 2020. This $2000 was distributed to me in 2021.

Now that I am working on 2021 taxes, I have my 1099-R, showing that I withdrew the money. 

On the TT screen showing IRA contributions, do I enter $3000 (my net contribution) or on 2 separate screens, show the $5000 inital contribution and the $2000 withdrawal (distribution)?

TIA for your help. If I need to provide more info, please let me know.

[MaryK4]

Just to clarify- Is this in the Deductions & Credits section? (see below).  If you entered the $3000 on the 2020 tax return, you would not have to enter it again for 2021 (only any contributions you made for tax year 2021).

[squidlady]

Hello there, it is in that section. I had to withdraw $2000 from the IRA in 2021 because when I was doing my 2020 taxes, TT told me I couldn't contribute the full $5000. (This was because of the unusual jump in income from hubby selling his rental house).

So I guess a better way for me to ask my question is (before I confuse MYSELF any more!) how does that distribution affect what I enter into TT for my IRA contribution for 2021?

Again - I deposited $5000 into the account in January 2021. I withdrew $2000 from the account in May when I was doing my 2020 taxes, on TT's instructions. What do I enter for my 2021 contribution? Thank you again.

[MaryK4 · Accepted solution]

Thanks for clarifying. For 2021, you do not have to subtract out the $3000 (since it was returned you should get the 1099-R which would show the return of the money but only interest as taxable) so enter the full $5000 as the contribution.  @squidlady

[squidlady]

Hi, yes the 1099-R shows the full $5000 contribution. Thank you very much!!

[squidlady]

Hi, I'm sorry but I found I have another question related to this. I've had my Roth open since at least 2002. Since I had to take that $2k out last year, it appears TT is asking me to enter my prior year Roth IRA contributions. If I leave this blank, is there a problem? The error checker didn't point anything out, I've left it blank until today (and I've been running my taxes the last 2 days).

Do I really have to go back 20 years to find/enter all my contributions? Thank you in advance.

[AmyC]

See Roth IRAs. You should not need the contribution amounts as everything is tax free when you take out the money  under the terms designated- currently.