Roth IRA excess contributions

No, you do not need to amend your 2022 tax return, since you removed the excess contribution you do not need to enter the Roth IRA contribution.

Generally, any earnings returned with the excess contribution for 2022 belong on your 2022 return and would be taxable.

But since you had a loss when you withdrew the excess contribution then all TurboTax will do is add an explanation statement why you returned the excess contribution when you enter a 2023 Form 1099-R for the return of excess contribution with a loss. Therefore, you don't have to report a taxable event.

If you want to add the 2023 Form 1099-R with codes P and J for the return of excess contribution (with loss) to your 2022 return then 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 2022?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution minus loss)
7. Box 2a enter $0
8. Box 7 enter J and P
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2023 Form 1099-R.

Thank you for the reply. To be clear, when you say "If you want to add the 2023 Form 1099-R with codes P and J for the return of excess contribution (with loss) to your 2022 return," does this mean adding the 2023 1099-R to my 2022 return is optional?

@DanaB27 

In your case, you don’t have any taxable earnings to report because you had a loss therefore your return won’t change when you enter the 2023 Form 1099-R with codes P and J (which you will get in 2024). All that TurboTax would do is add an explanation statement but this wouldn’t be a reason to amend your 2022 return but some people prefer to show the return of excess contribution and add the explanation statement.

@RMSch1061 

Got it. So no need to amend now since I removed my excess contributions already (and didn't initially report them), and have no related earnings to report as income since it was a loss. And then optional as to whether I'd like to amend 2022 when I receive the 2023 1099-R in 2024, which boils down to my preference. I have all that right?

@DanaB27 

Yes, in your case that is correct because you didn't have any taxable earnings and your box 2a on your 2023 Form 1099-R with codes P and J should show $0.

@RMSch1061 

Thanks for your help!

@DanaB27 

Hello - this is my post from last year, and I have an update... Turns out, I did actually report my Roth contributions on my 2022 return. I did not think I did, because there was no penalty assessed at the time. However, as I'm doing this year's 2023 return, the software suggested I reported, because it was going to tax me 6% on an excess contribution that I thought I had not reported (but apparently had). With this new information, I assume it is now required to go back and amend my 2022 return with the 1099-R from 2023 showing the withdrawals with code PJ. I am hoping that by so doing, it will remove the penalty from my 2023 return. Can you confirm (or challenge) my thinking?

Yes, if your 2022 Form 5329 showed a penalty on line 25 then you will have to amend your 2022 tax return and go to the IRA contribution section to indicate that you withdrew the excess contribution:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Continue until the penalty screen and enter the excess contribution amount withdrawn.

Yes, if you need to amend your 2022 return then you can add the Form 1099-R with code PJ, but entering the 1099-R with codes PJ won't remove the penalty you will have to indicate in the IRA contribution section that you withdrew the excess contribution.

You can just delete the excess contribution entry on your 2023 return since you did not have an excess contribution for 2022:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Do you have any Excess Roth Contributions" answer "Yes"
5. On the "Enter Excess Contributions" screen delete the excess contribution from 2022 that was wrongly carried over.

@RMSch1061 

Thanks @DanaB27 . Funny thing is, my 2022 return does not have a 5329 nor show a penalty... Maybe best if I backtrack and start from the beginning to ensure clarity...

I filed my 2022 return in February 2023. On this return, on the Traditional and Roth IRA Contributions worksheet, in Deductions and Credits, I reported $4920 of contributions to a Roth IRA. In this worksheet, it asked me if any of my contributions were in excess, to which I said "no" and moved on. TurboTax never warned me that based on my MAGI, that I may be penalized for an excess, and a 5329 did not generate with my 2022 return.

I then read not long thereafter, around March 2023, that I was only eligible to contribute a reduced amount in 2022 based on my MAGI. I believe I still could've contributed some amount, but to be safe I had my financial advisor remove all of my 2022 contributions plus earnings (in this case, it was actually losses). At the same time, I had them remove my 2023 contributions to date (which was $1230) plus earnings ($14) and then stopped contributions.

Now in 2024, I received my 1099-R to reflect the 2023 early withdrawals. I had two funds with investments, and each generated two 1099-Rs as follows:

1- (1) 1999.66 (2a) 0.00 (7) JP (no other applicable boxes or all unchecked/0s) - this is 1/2 of my 2022 contribution returned to me, minus the losses

2- (1) 622.29 (2a) 7.29 (7) J8 - this is 1/2 of my 2023 contributions returned + earnings

3 - (1) 1999.67 (2a) 0.00 (7) JP - the other 1/2 of my 2022 contributions, minus the losses

4 - (1) 622.30 (2a) 622.30 (7) J8 - the other 1/2 of my 2023 contributions + earnings

I entered all of these on my 2023 return. And here's where it started getting tricky... When I was ready to do the Federal Review, a check popped up that I needed to enter $4200 on a line on form 5329. This prompted me to go back to the Roth Contributions worksheet. Here, it suggested that I had an excess of $4450 from 2022 (generated to line 18 of 5329), and then on line 29 it entered that $4200 "credit" from 2023, so then I was being penalized 6% on the difference - $250. What I don't understand is where that $4450 of "excess" was generated from, and then why it told me to enter the $4200 either. Since I withdrew all my contributions from 2022 and 2023 before the 2022 tax filing deadline, I should not have any excess to be penalized... A TurboTax employee suggested I just "delete" the $4450 to "fix" it, but that doesn't make me very comfortable... It came from somewhere and I'd like to know where, if possible. 

I know that was a lot... Thanks so much for your continued help.

Yes, you can delete the incorrect excess contribution entry on your 2023 return since you verified that you did not have a 2022 Form 5329 and 2022 Schedule 2 with line 8. You do not have an excess contribution since you removed all contributions by the due date of the return. You do not have to pay a 6% penalty for 2023. Please delete the excess contribution entry during the interview.

Since I cannot see your return I cannot say why you show a prior year excess contribution in your 2023 return but don't show anything on your 2022 return. 

You only need to entered the Form 1099-Rs with code J8 on your 2023 tax return. The Form 1099-Rs with code PJ belong on your 2022 tax return but you had no earnings so there won't be a taxable event and you do not need to amend your 2022 tax return. If you already entered them on your 2023 return then the code P will tell TurboTax that they belong on the 2022 return, therefore you don't need to delete them.

[Edited 2/24/2024 | 2:30pm PST]

@RMSch1061 

My 2022 return does not include a Schedule 2.

I have never used TurboTax desktop, so there shouldn't be any other source for forms.

I entered all the 1099-Rs, both those with J8 and JP, on my 2023 return. Should I have only entered the J8s? I thought even though they apply to 2022, that I would still need to report it as a 2023 1099-R.

@DanaB27 

You don't need to enter the 2023 Form 1099-R with code PJ  on your 2023 tax return but if you did then you do not need to delete them because the code P will tell TurboTax to ignore the distribution for 2023 and only apply taxes withheld to the 2023 return.

I think what happened is that on my 2022 return, it asked for my Roth contributions, but then asked if any of these were excess. I said "no" because I didn't think anything was in excess. So then it did not fill form 5329 to show the penalty or apply any other additional tax on Schedule 2.

I don't know why an excess for 2022 autopopulated in TurboTax on my 2023 return. That's still a mystery to me...

I know you say I don't have to report the 2023 1099-Rs with code JP on my 2022 return. My question though, is that the IRS will have received form 5498 showing my contributions for 2022. If it doesn't then have me reporting a 1099-R to show the distribution of that contribution, will it come back to me later and charge a penalty/send a bill? Should I "close the loop" so to speak, for 2022 by reporting those with code PJ? 

@DanaB27 

No, the IRS should not come back since you removed the excess contribution and had no taxable income to report on your Form 1099-Rs. If you choose to amended your 2022 tax return then TurboTax will add the explanation statement why you returned the excess contribution when you enter your 2023 Form 1099-Rs with code PJ on your 2022 tax return.

Ok. I think to set my mind at ease, I will amend my 2022 return to include the two 2023 1099-Rs with code JP, so that I can add the explanation statement. I will also remove from the Roth IRA worksheet that I made contributions in 2022, to clear that out as well even though it does not come up on the return.

Then on my 2023 return, I can remove the 1099-Rs with code JP and just leave the two with code J8, correct? (Or, does it matter if I leave them?)

I think this will tie everything up neatly.

@DanaB27 

Yes, it doesn’t matter if you remove the 2023 Form 1099-Rs with code JP because code P on a 2023 Form will tell TurboTax to ignore the income in the 2023 tax return and only apply taxes withheld from box 4 and 14 to the 2023 return.  Therefore, since you had no taxes withheld, you can either delete the Form 1099-R with code PJ or leave them on the return.

Thank you so much @DanaB27 for all your help!!

I am going back to amend my 2022 return. After entering my 1099-Rs with code PJ, it is now asking me the value of my Roth IRA on December 31, 2022. Should this be the value it was, or the value minus the contributions I removed?  It also looks like I can proceed without answering this question at all.

@DanaB27 

It seems that you still have the excess contribution entered in the IRA deduction section. Please go back and make sure that you enter the full excess contribution amount (ignore the losses) as removed on the penalty screen:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Continue until the penalty screen and enter the excess contribution amount withdrawn (ignore the losses).

Once this is fixed TurboTax will not asked this question. This question is used to calculate the penalty amount on Form 5329. 

Thanks. When I removed the contributions in the Deductions and Credits section, this question ended up going away anyway.

@DanaB27