report return of excess contribution

[zymxhjjtm197227]

Hi, I've contributed ROTH IRA $2000 in march 2021, then had to withdraw all  on January 2022 due to too high MAGI. I sent request to my broker, Fidelity, to withdraw all my contribution. They have calculated and then returned amount of $1944 . My questions are

1, Since I don't have gains, I don't own any TAX or penalty, right?

2, If I don't own any TAX/penalty can I report the return of excess contribution on my 2021 return instead of doing amendment  after receive1099R in 2023?

3, If I file ROE on 2021 return without 1099R, for BOX2 " taxable amount should be 0", right? What code do I enter box 7? 

[DanaB27]

1. Yes, since you did not have any earnings on the excess contribution you do not owe any tax and penalty on the distribution.

2. Yes, you report it on your 2021 return, you do not have to wait for the 1099-R.

3. To create a 1099-R in your 2021 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 2021?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution minus earnings)
7. Box 2a enter the earnings of $0
8. Box 7 enter P and J 
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.

[zymxhjjtm197227]

Follow up: now with my 2021 IRA contribution is none. I am planning to contribute to non-deductive IRA and convert it to ROTH IRA before TAX deadline. Do I file this backdoor ROTH IRA in 2021 too? thanks

[DanaB27]

Yes, you will enter the nondeductible contribution on your 2021 tax return like this:

1. Click “Deductions &Credits” on the top
2. Click "I'll choose what to work on"
3. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
9. If you had a basis in the Traditional IRA before then enter the amount.
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount.

You will not enter the conversion on your 2021 return since it took place in 2022. The conversion will be entered on your 2022 tax return when you get your 1099-R in 2023: 

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contribution to your IRA?" since you had a basis from your 2021 return.
12. Answer the questions about the basis and value

[zymxhjjtm197227]

Hi, so I file 2021 non-deductive contribution on 2021 return, but file conversion on 2022 return, even though it is 2021 contribution's conversion, am I correct?

[DanaB27]

Yes, you will enter the contribution on your 2021 return and the conversion on your 2022 return since the conversion takes place in 2022 (you stated you plan on doing this).

[zymxhjjtm197227]

follow up question: Hi I am entering my 1099R on TT now. I am following the steps, the 1099R box 7 code P is "return of contribution taxable in 2020",  code 8 is " return of contribution taxable in 2021". I contributed to roth IRA in 2021 for year of 2021, then did return of excess contribution in 2022. should I enter 8 or P? thanks

[DaveF1006]

Yes, since you returned an excess contribution of a Roth contribution in 2021, it will be a code 8.