Roth IRA Excess Contribution 2018

[noconn]

My husband and I are 62, and both have Roth IRA's.  In 2018, we made our usual contributions.  We  actually made more money than usual and should not have contributed.  But when we did the taxes in TurboTax, we somehow skipped the sections on IRA Contributions and did not enter our Roth IRA Contributions.  We filed our taxes in April of 2019, and did not realize the error until July of  that year. 

In July of 2019, we withdrew the contributions and the earnings from both our IRA's and put it into a brokerage account.  We have now received 1099R's,  with a distribution code of PJ, with the amount that we withdrew.

My question is how do we correct this going forward.  Do we refile 2018, entering in our Roth Contributions?  Will TurboTax let us indicate that the money has been withdrawn, and will we have to pay a penalty for those contributions?    And on our 2019 taxes, do we need to add the distribution earnings as income? 

Thank You!

[macuser_22 · Accepted solution]

A 2019 1099-R with a code "P"  (non-Roth) or "JP"  (Roth) in box 7 is taxable in 2018, not 2019

You must amend 2018 to report it. The 2018 1099-R interview will say that code P means "Return of contribution taxable in 2017", but the interview will ask if this it a 2018 1099-R or a 2019 1099-R. Say 2019 and the "taxable in 2017" becomes "taxable in 2018" (the year advances by 1 each year).

The returned contribution is not taxable, but any earnings reported in box 2a are taxable and also subject to an 10% penalty of you are under age 59 1/2.

[noconn]

Thank You!   So once I redo 2018 taxes,  I don't need to  include these on my 2019 taxes? 

[macuser_22]

Correct, unless there was any tax withheld in box 4 which would be VERY unusual,  then the withholding must be reported in the year withheld - 2019.

[herminator]

Hi I have similar situation,  amending 2018 return to handle excess roth contribution that was removed on 3/27/2018 before I filed 2018 return.  But I did not report the income on the excess, so doing that now that I have the 2019 1099R.  That all went into Ttax OK. 

My question is do I have to correct 2018 on the ROTH contribution as it was done orig. as 2500 as I had already backed out the excess 3000.00     So do I have to go back and change that to show 5500 contributed but 3000 removed before April 15, 2019  or does the new 1099R with codes P & J cover that.  Thanks.

[macuser_22]

---

@herminator wrote:

Hi I have similar situation,  amending 2018 return to handle excess roth contribution that was removed on 3/27/2018 before I filed 2018 return.  But I did not report the income on the excess, so doing that now that I have the 2019 1099R.  That all went into Ttax OK. 

My question is do I have to correct 2018 on the ROTH contribution as it was done orig. as 2500 as I had already backed out the excess 3000.00     So do I have to go back and change that to show 5500 contributed but 3000 removed before April 15, 2019  or does the new 1099R with codes P & J cover that.  Thanks.

---

You should remove the amount return form the IRA contribution section so it does not affect the 8880 (Severs Credit) if that applies and does not carry to 2019.   If you already started 2019 and the excess has already carried to 2019 the you need to remove that also so 2019 does not add a penalty.

[herminator]

OK so I also updated the ROTH contribution to show 5500 contributed and 3000 was withdrawn before April 15, 2019.   So that did not affect the tax due, but corrected the roth section.

So bottom line, the tax went up by $30.00  (ie 24% of 125 on the income on the excess contribution)

plus $13.00 (10% penalty on the 125 of earnings),  for total of $43.00 due., which is all from the 1099R update.

So will do the snail mail in of the amended 2018 return.