SEPT IRA Excess Contribution and Amending Return

Forum|Forum|7 years ago
July 25, 2019
4 replies
31 views

Hello,

For 2018 taxes, Turbo tax calculated my maximal SEP IRA contribution as $549.00. I filed my 1040 with a contribution amount of $549.00 to SEP IRA. However, I made a mistake and requested Vanguard to contribute $686.00 towards my 2018 SEP IRA account. Now I have a discrepancy of $137 between what was filed and what was actually contributed to Vanguard. Vanguard can remove the excess contribution plus the interest before Oct of 2019 deadline, but they said that I need to file an amendment and they will issue a 1099-R. I have an concern with amending my taxes because if I amend taxes for 2018 with the same SEP IRA contribution of $549.00 (correct maximal contribution) then it might be look as no changes were made to the return. Should I amend the 2018 tax to reflect a lesser contribution amount than $549.00 and have Vanguard remove the excess to match? Also, the 1099-R issue from Vanguard would mean that I would to pay taxes on the excess of $137 when I never received any deduction due to reported a contribution of $549 on 1040.

Critter

Level 15

You have nothing to amend since you filed correctly to begin with ... you may have to report the earnings on the distribution on the 2019 return since that is the year the excess money was removed.

dmertz

Level 15

If the 2019 Form 1099-R includes code P in box 7, the earnings shown in box 2a of that form are reportable on the 2018 tax return and the 2018 tax return will need to be amended to include the 2019 Form 1099-R. If the 2019 Form 1099-R instead includes code 8 in box 7, the earnings will be reportable on the 2019 tax return.

Since there is no immediate need to amend, I would wait until you receive the 2019 Form 1099-R near the end of January 2020 and then amend 2018 if the form includes code P in box 7.