I made an excess contribution for my Roth IRA for the tax year 2022 and then took out the excess contribution in 2023 with a request to my custodian that it was an excess contribution. My 1099-R was sent for this tax year referring to that excess contribution that was taken out and it only has Code J in it which only specifies this is an early distribution. My custodian has acknowledged that this was indeed requested as an excess contribution removal but is firm on the 1099-R being correct with only code J. Entering this into TurboTax, it doesn't seem to be giving me the right options for labeling that this was an excess contribution. Instead it seems to be routing me to label this as a removal of deposited funds (it's asking me how much I've deposited into the Roth IRA since its inception).
Since the form has a code J, it is not required to be entered unless it shows tax withheld. A code of P will tell the program to ignore the form. If you corrected your 2022 return and showed the excess as removed, you are done. Otherwise, you need to amend your 2022 return to remove the excess contribution. See these instructions for excess Roth contributions.
This makes sense. I indeed now need to take go back to my last year return to amend it related to this excess. Thanks for this.
Did you take the excess out before the due date of your 2022 tax return, Aprl 15 2023?
The rules are differnt for before and after.
When you take excess plus positive allocable earnings from a Roth IRA,
you have to use Form 8606 to determine the amount to include in income.
It may be zero.
If it is zero you have to update your records for basis in Roth IRA by subtracting the allocable earnings.
The request to remove the excess was made a week prior to the deadline (April 18, 2023) but the overall transaction was completed (meaning I saw the funds fully moved into my bank account) on April 20, 2023.
In my case, the adjusted excess contribution had losses (so it was a lower amount that was removed from the original contribution) but I'll look into this form 8606.