Roth IRA

[Chris_99]

Thank you so much for the clarification with the code - JP 2022 Form 1099-R!  I will contact Vanguard to request the return of $6000 and follow the instructions to file it.

For the 2nd 2022 Form 1099-R, box 1-$1250, somehow, it didn't generate Form 5329.  I remember you said $1250 will be on line 20 of Form 5329 to eliminate the excess contribution penalty for 2022 and beyond.   Am I doing something wrong again?  Or because she had zero income in 2022, TurboTax is confused?

Thanks so much for your help!

[dmertz]

@Chris_99 , in reviewing the previous posts, the return of $1,250 contribution for 2021 was to make room to apply the excess $1,250 from 2020 as part of the 2021 contribution.  In that case , the $1,250 should be present on line 19 of the 2021 Form 5329 eliminating that excess in 2021.  With the excess resolved in 2021, there is no excess carried over to line 18 of the 2022 Form 5329.

(Had the excess not been resolved in 2021, it would have carried forward to line 18 of the 2022 Form 5329 where a regular distribution of $1,250 in 2022 appearing on line 20 would eliminate the excess.)

[Chris_99]

Thank you so much for spending your time going through the old posts!  Yes, you are correct, the $1,250 is on line 19 of the 2021 Form 5329.

Rereading the posts 2nd time, I remember I finally followed your fancy moves, saved 6% penalty in 2021.  Originally I just wanted to pay $75... I'm so sorry I must copied your words wrongly when you gave advices on my original plans.  Sorry I confused you over and over.

I put $6500 to her 2023 Roth yesterday, Vanguard rep said about a week later, I can call in and they can do the excess withdraw, at that time, she will have enough cash to do the return of 2022 $6000 excess contribution.  I am almost there.  Thanks again for the kind and generous help!  I sincerely appreciate it.

[Chris_99]

Hello dmertz,

I re-read all your posts for the 3rd time, and took detailed notes, and come up with these number.  I have to go through you as I am terrified making mistakes:

Explanations:

3/1/2022, contributed $6,000 to 2022 Roth IRA

3/2/2023, returned ($6,000) and losses ($94.71) for the return of contribution

Box 1: $6,000 or $5,905.29 (I guess it's $5,905.29?)

Box2a: 0

no need to make any 2b boxes, nothing goes in box 3-6

Box 7: J and P

Box 16: $6,000 or $5905.29 (I guess it's $5,905.29?)

Which year on form 1099-R, Answer: 2023?

For Deduction part of interviews:

1. Did you make a Roth IRA contribution for 2022?  A: Yes

2. Is this a repayment of a retirement distribution?  A: No

3. Enter your total Roth IRA contribution for 2022.  A: $6,000

4. Switch from a Roth to a Traditional IRA?  A: No

5. Would you like us to track your Roth IRA basis?  A: Yes

6. Withdraw from your Roth IRA before 2022?  A: I should say "No", correct?

7. Roth IRA contribution prior to 2022.  A: $2,602 (I should ignore all the manipulations we did, just put the net 2021 Roth contribution here, correct?)

8. Any Roth IRA conversions?  A: No

9. Tell us if you contributed more to a Roth IRA than was allowed in 2022 or any previous years.  A: Yes

10. Enter excess Roth IRA contribution for prior year (to 2022).  A: $0 (is this correct?)

11. Enter the value of your Roth IRA on Dec 31, 2022.  A: $8,105.33

12. Your contribution was too high, you have an excess contrition $6,000

13.  Contribution withdrawn before due date: A: $6,000

I entered the 2022 Form 1099-R with J, P in Box 7, TT asks me to amend 2021 tax, I can ignore it as I paid $20.40 for 2021.

I also entered the 2022 Form 1099-R with J in Box 7.

By now I've cleaned up all the mess I made with my daughter's excess Roth IRA contributions, correct?  Thank you SO much for your kind and generous help, without you, I can't imagine.....

[Chris_99]

I called Vanguard, was told "no need to mock 2023 1099-R as there is no capital gain to report", is he right?  Thanks!

[RobertB4444]

Based on everything you've entered none of this activity should have any effect on 2023.  

@Chris_99 

[Chris_99]

Thanks so much for your reply!  Do you mean I don't need to mock the 2023 1099-R for her return of 2022 excess Roth IRA contribution?

[DanaB27]

Yes, you won't have any taxable income to report on your 2022 tax return because you had a loss but since you are working on your 2022 tax return it is a good idea to enter the mock 2023 Form 1099-R with code JP to report the distribution and to trigger the Explanation statement for the IRS.

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 plus earning)
7. Box 2a enter the earnings
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.
11. Click "Continue" after all 1099-R are entered and answer all the questions.
12. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" if you are over 59 1/2 (if you are under 59 1/2 click "Continue")

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2021" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.

Yes, step 10 for your contribution entry is correct: "Enter excess Roth IRA contribution for the prior year (to 2022).  A: $0"

Yes, you can ignore 2022 Form 1099-R with J, P in Box 7 because you had already reported it in 2021. Yes, 2022 Form 1099-R with J in Box 7 is entered on the 2022 return.

@Chris_99 

[Chris_99]

DanaB27,

Thanks so much for your kind and clear advice, I am filing my daughter tax now!!!