Roth IRA Excess Correction

[June123]

I contributed to my Roth IRA in 2020 for a 2020 contribution.  Later in the year I found out that my income would disqualify me due to company stocks I was awarded.  I notified my financial advisor and he removed the 2020 excess contribution in 2020 and any excess earnings, it had actually gone down in value, and put it into a savings account.  I received a 1099-R with codes 8, J.  I am not sure if he removed the excess properly and I am not sure what I need to report on my taxes.  Do I report that as income even though it was a correction of excess contribution? Were the right codes used on the 1099-R? Do I need to fill out a 5329 form as well? Or do I not need to report it at all as it was a correction done prior to tax filing and in the same year? I am under the age of retirement and do not want to get penalized.  Thanks.

[macuser_22]

Just enter the 1099-R.

You can always withdraw your own Roth contributions tax and penalty free.

Enter a 1099-R here:

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

One of the followup questions will ask for your prior year** contributions not previously withdrawn. Those contributions that still remain in the Roth will not be taxed or subject to a early withdrawal penalty. That will add a 8606 form to your tax return with the Roth contribution and tax calculation in part III.

Note: **Prior year - any current year Roth contributions should be entered into the IRA contributions section. They will not show up in the prior years contributions but will be accounted for on the 8606 form that calculates the taxable amount.

[June123]

Thank you.  I entered the 1099-R form into Turbo Tax.  Do I also need to report that I originally contributed $6000 to my Roth IRA for 2020 or just leave that blank as the entire contribution was corrected and removed prior to filing?  I did not have any earnings on the contribution for the duration it was in the Roth IRA account, only some losses.  Thanks.

[macuser_22]

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@June123 wrote:

Thank you.  I entered the 1099-R form into Turbo Tax.  Do I also need to report that I originally contributed $6000 to my Roth IRA for 2020 or just leave that blank as the entire contribution was corrected and removed prior to filing?  I did not have any earnings on the contribution for the duration it was in the Roth IRA account, only some losses.  Thanks.

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No.  You do not need to enter the contribution.   Roth contributions do not go on a tax return.

The only reason to enter would be the following but that no longer applies to you.

1) Tell you if your income qualifies you for a contribution and warn you if it does not.
2) Check if your income exceeds the limit to contribute to a Roth.
3) Track your contribution year-to-year if you use TurboTax every year.
4) Add the Retirement Savers Credit if you qualify.

[June123]

Thank you for your response.  I appreciate it.