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Level 2
posted Jun 4, 2019 9:13:55 PM

T-IRA to Roth conversion prompting me to explain excess contribution?

I contributed $5,500 to a Traditional-IRA between Jan and Mar 2018. In March, $5,500 was converted to Roth. The contribution but not the withdrawal was filed in the 2017 return (a 1099-R was not issue because the withdrawal was done in Q1’2018).

Fast forward to July, 2018, I contributed another $5,500 to my T-IRA and subsequently converted it that month to a Roth. This year, I received a 1099-R from my bank, indicated a withdrawal of ~$11,000.

While filing my return for 2018, it appears everything enters correctly (my deduction shows a T-IRA contribution of just $5,500), but, when I go through the 1099-R prompts, I receive a message that I need to provide an explanation for “withdrawal of excess traditional IRA contribution from 2017 or  previous year.” What is causing this prompt to appear and how do I correct for it? Is it because I report a $5,500 contribution in my deduction sections? Maybe that shouldn’t exist since the account was converted (and empty) prior to year end of 2018?

 

0 6 2869
6 Replies
Level 15
Jun 4, 2019 9:13:57 PM

You've mistakenly put a zero in box 2a of the Form 1099-R or have left it blank.  The Form 1099-R provided by the payer should have had the same amount in box 2a as is in box 1 and must be entered that way.

Expert Alumni
Jun 4, 2019 9:13:58 PM

It depends.  The key has to do with your entries from when you entered in your 1099-R that reports the conversions.  Remember that the 2017 TIRA contribution was reported on your 2017 return even though it was physically made in 2018.  However, this creates a 2017 basis in the TIRA which should have been reported on your 2017 Form 8606.  You will need that information to report the conversion correctly in TurboTax.  Delete the 1099-R that reported the conversion, and re-enter it using the following instructions:  

  1. Enter in the information as reported on the 1099-R for this IRA in the main portion of the screen (box 2a should be blank, and "taxable amount not determined" should be checked, and box 7 probably has a code 2).  Hit Continue.
  2. Next screen says Good News: You Don't Owe Extra Tax on This Money (this means there's no penalty, but the income still needs to be reported correctly to be removed from taxable income).  Hit Continue.
  3. Next screen:  Did You Inherit the IRA from This Payer?  Probably No.  Hit Continue.
  4. Next screen asks What Did You Do With The Money From This Payer?  First select I moved the money...and then I converted all of this money to a Roth IRA account.
  5. After a few screens relating to Disaster Payments, you come to a screen asking Any Nondeductible Contributions to Your IRA? Click YES and Continue.  
  6. Enter how much was your total Basis on December 31, 2017.  This is the amount of total nondeductible contributions you've made throughout the years.  This information is on Form 8606 from your 2017 tax return (which is why you need to look at your 2017 return, so you can report this).

You will still have a few questions after this, but you will see the portion of your distribution that was from your nondeductible contributions will have been excluded from your taxable income and is not subject to an overfunding penalty..

Level 2
Jun 4, 2019 9:14:00 PM

Thanks, Daniel. I will try that now. Another quick question; should I still be report the contribution to my T-IRA on the deductions page?

Level 2
Jun 4, 2019 9:14:01 PM

Thanks, Daniel. I think that did it. I no longer have a prompt about the explanation; I am guessing my 2017 basis was entered incorrectly (I can confirm it was correctly incluved in my 2017 8606). Regarding including the contribution on the deductions page; it looks like things go crazy if I don't.

Expert Alumni
Jun 4, 2019 9:14:03 PM

Sorry, I was away on the first response you gave me earlier.  But it sounds like you got it.  I'm glad.  Best of wishes to you.

New Member
Jun 4, 2019 9:14:04 PM

When I look at my income I see my IRA distribution of $5,500 for 2018 is "taxable". Can someone elaborate on what this means exactly? The IRA contribution of $5,500 was made with post-tax dollars in 2018. This amount was converted to a Roth IRA in 2018. I just want to make sure I am not being taxed on the entire distribution of $5,500. My understanding is I am only taxed on any gains made since the contribution, and if thats true, that I do not need to note it somewhere in my return.