Roth IRA Early distribution

Forum|Forum|4 years ago
March 21, 2022
11 replies
18 views

Last year I opened a Roth IRA account and contributed 10k (after tax). Several months later I realized my income exceeded the Roth IRA cap, so I withdrew all the 10k and 400 capital gain. When I'm reporting tax this year, TurboTax calculated 3.5k federal tax due for my Roth IRA "early distribution". What can I do to avoid this?

Best answer by ThomasM125

You would make an entry for a substitute form 1099-R and put the withdrawal amount in box 1 and the earnings in box 2(a). You will see an option to create a substitute form 1099-R on the screen that says Tell Us Which 1099-R You Have when you go to enter the form 1099-R. Code the substitute form 1099-R as "8" in box 7, for excess contributions plus earnings.

DanaB27

Level 15

Did you request the return of excess contributions plus earnings? If this was an excess contribution for 2021 withdrawn in 2021 then your Form 1099-R should have codes J and 8; box 1 should be the excess contribution plus earnings and box 2a should be only the earnings of $400. Only the earnings will be taxable income and also subject to the 10% early withdrawal penalty.

If your Form 1099-R shows this as regular distribution then might need to contact your financial institute to correct this.

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