SEP-IRA Excess Contribution Reporting

[notanumber]

I made an error on my 2021 Taxes and did not defer some income (cash basis) to 2022 income. I did not catch this until a few weeks ago. I filed an amended return for 2021 and with the corrected income for 2021 I had an excess contribution to my SEP-IRA for 2021. I contacted Vanguard and had the excess removed from.

How do I report the excess contribution and pay the penalties? Should I have included a substitute 1099-R with the amendment? Or do I include a substitute 1099-R with the 2022 taxes or wait until next year for a 1099-R from Vanguard?

Thanks in advance.

[DaveF1006]

Check your 2021 original return to see if there was a 5329 form in the return.  If so, you should have already been assessed your 6% penalty for 2021. Now for 2022, you can create a substitute 1099R for the return of contribution taxable in 2021. To report.

1. Open (continue) return if you don't already have it open.
2. Inside TurboTax, search for 1099-R and select the Jump to link in the search results.
3. Answer Yes on the Your 1099-R screen,
4. Click on the box that you are creating a substitute 1099-R
5. Then select Continue.
6. in order to create a substitute 1099-R, you will need to obtain and name, address, and payer TIN as required so you can record the information properly on the form.  . 

The code you will need for box 7 is P. You may wait until next year when you receive your 1099R to report. If you report it this year using the substitute 1099R, you won't need to report the 1099R you receive next year. 

[notanumber]

Hi Thanks for the reply. No 5329. When I did the amended 1040X for 2021 I reduced the SEP-IRA contribution to what it should have been in the step-by-step form. Should I have l left it with the over amount?

How do I take care of the 6% penalty without the 5329 form?

Do I still enter the substitute 1099-R if no 5329?

Thanks

[notanumber]

So I don't have to do anything this year and just wait for the 1099-R next year?

[DanaB27 · Accepted solution]

Yes, you will wait for Form 1099-R.

You removed the excess and therefore don't have to pay a penalty.

When you make an excess SEP contribution you have two options to fix the mistake:

1. Have the excess removed 
2. Under-contribute by the same amount the next year and pay the 10% penalty (file Form 5330)

Please see IRS SEP Plan Fix-It Guide - Contributions to the SEP-IRA exceeded the maximum legal limits for details.

Please see SEP-IRA excess contribution previous year: options? Process? for more information on option 2.