Reporting excess IRA contributions 2018 & 2019

[julesj65]

Greetings! In January of 2018 I had a deposit to my IRA (gift) which was in excess; I removed this money in Feb 2019, before filing my 2019 tax return (through Turbo Tax). I how have a 2019 1099R  NOTE: when I did my 2018 return, I believe I did not enter this deposit or removal anywhere (I searched my old return for the $ amt and it is no where; also when TT shows the little 2018 vs 2019 comparison, it doesn't show anything for 2018)  I am being told (after entering the 1099R into turbo tax for 2019, that I need to amend 2018 - I understand that, and will do so (it tells me I have 2 years or so to do this, does it matter if I amend this before or after doing 2019)?

In January of 2019 there was another deposit to my IRA and I am in the process of removing. I want to be sure that I record this correctly this year and not have to amend 2019 return. I see that I am able to enter this information in Turbo Tax 2019 and will do so (this is where I notice that there is no entry for the 2018 comparison). Will I still receive a 1099R next year and will I need to do anything with it at that time?

Final question, I assume the amended return relates more to Federal? When I amend the 2018 return will turbo tax tell me if I need to amend the State one as well?

Thank you in advance for any advice!

[dmertz]

You really only need to amend your 2018 tax return if the Form 1099-R for the return of contribution shows a taxable amount in box 2a.  Your 2018 tax return should have included an explanation statement regarding the return of contribution, but in the absence of taxable earnings required to be reported, you now probably only need to provide explanation if the IRS asks for it.  Since a taxable amount in box 2a increases your taxable income, you likely have to file an amended state tax return as well.

When preparing your 2019 tax return, enter the IRA contribution that was made, then indicate how much of that contribution was returned, then enter a made-up 2020 Form 1099-R, similar to the 2019 Form 1099-R that you received, showing in box 1 the total gross amount distributed and in box 2a the amount of earnings distributed with the returned distribution.  If there were no investment gains that required earnings to be distributed, enter $0 in box 2a.

[julesj65]

Thank you! My box 2a is for $28 so I suppose I will amend! Should I do this prior to filing 2019 or does it not make a difference?

[dmertz]

You can file your 2019 tax return first, if you like, but the total effort is the same either way.  Just make sure that the returned contribution does not appear in your 2018 tax file a part of your Roth IRA contribution basis that transfers to your 2019 tax file, otherwise you'll need to correct your Roth IRA contribution basis in your 2019 tax file.