Roth IRA

[robv10]

I am 66 years old. Put $7000 into Roth on December 15 2022 and took it back out on January 20 2023 because I had earlier withdrawn money from my regular IRA in 2022 and it seemed my 2022 taxes were going to be negatively effected. Along with the $7000 was $184 of earnings calculated by Fidelity based on IRS regulations. My form 5498 for 2022 only shows the $7000 deposit. How do I handle the fact that it was undone in January (within 60 days) and also the extra $184. I did get a letter from Fidelity that said the $184 has to be reported as income in the year the excess contribution was made (2022 ??). The letter also states that the transaction ($184) will be reported on form 1099R which will be mailed to me next January. If so how can I report it this year? Finally, when turbo tax asks me about 2022 Roth contributions do I say no because it was returned in January even though 2022 form 5498 only shows the deposit of $7000?

[DanaB27]

No, you can enter the Roth IRA contribution and then enter that you removed the $7,000 by the due date when you get to 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” and enter the $7,000 Roth contributions
4. Continue until the penalty screen and enter the excess contribution amount withdrawn ($7,000).

Yes, you will get a 2023 Form 1099-R  in 2024 with codes P and J for the withdrawal of excess contributions and earnings. This 1099-R will have to be included on your 2022 tax return and you have two options:  

• You can wait until you receive the 2023 Form 1099-R in 2024 and amend your 2022 return or
• You can report it now in your 2022 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2023 Form 1099-R into the 2023 tax return since the withholdings are reported in the year that the tax was withheld. The 2023 code P will not do anything to the 2023 tax return but the withholdings will be applied to 2023.

To create a Form 1099-R in your 2022 return 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 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" since you are over 59 1/2 

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.