tt excess contribution info

[gjgogol]

please see attached screen shot. It asks for my "excess Roth IRA contributions for prior years". I do not know what amount to use. I made excess contribution in Jan 2022 but then subsequently took distribution of that contribution PRIOR to submitting my 2022 tax return and did not receive 1099R until Feb 2024 (form date was 2023 form 1099R). so I don't know what amount to use in that page attached. do I NOT include that excess contribution since i received distribution of it prior to return due date?

[DanaB27]

Yes, you do not enter an excess contribution for prior years. You do not have an excess contribution since you remove the excess with the earnings before the due date.

[gjgogol]

@DanaB27 TT gave me a "warning" about amending prior year (2022) return (please see attached screen shot). My earnings on this 2022 excess contribution was a loss due to value of shares decreasing. So I contributed $7K in Jan 2022 and my distribution (March 2023) was $5900.

The 2023 Form 1099R also had code P--Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2022 in box 7. Do I need to amend my 2022 return for any reason?

[DanaB27]

No, you do not need to amend your 2022 tax return. Your box 2a should be $0 since you had a loss. Only earnings are taxable and have to be reported. All that TurboTax would do is add an explanation statement when you enter the Form 1099-R with PJ with a loss. Therefore, you do not need to amend your 2022 tax return.

[gjgogol]

@DanaB27No code "PJ"...only code "P". Does that make a difference?  And yes box 2a is blank.

[DanaB27]

For the return of an Roth IRA excess contribution the Form 1099-R should have codes P and J since code P only indicates the removal of an excess deferral. You might want to inform your financial institution. 

You do not need to amend your 2022 return since you had no earnings and therefore you have no taxable income to report.

[gjgogol]

@DanaB27Unfortunately I also made an excess contribution in Dec 2021 but then subsequently took distribution of that contribution in March 2023. I received 2023 Form1099R in Feb 2024.  Do I include that excess contribution in the TT page (see attached) or not include it since i received distribution in 2023?

[DanaB27]

Yes, you will enter the excess contribution from 2021 on the "Enter Excess Contribution screen". TurboTax will fill out Form 5329 showing this excess contribution on line 18 and the distribution on line 20. This will resolve the 2021 excess contribution and line 23 "Excess contributions for 2023" should be $0.

[gjgogol]

@DanaB27sorry to bother you again...you stated "For the return of an Roth IRA excess contribution the Form 1099-R should have codes P and J since code P only indicates the removal of an excess deferral. You might want to inform your financial institution."  My financial institution is not fully cooperating and is not sure they need to also use code J.  What happens if I only use code P?

I tried both ways, i.e. only code P and then using code P and J. It didn't seem to affect TT in anyway.  Why is that? I expected to see Form 5329 line 1 and 2 to have something in them when using both codes J and P, no?

[DanaB27]

You can show your financial institution the Form 1099-R instructions:

"Roth IRA. For a distribution from a Roth IRA, report the total distribution in box 1 and leave box 2a blank except in the case of an IRA revocation or account closure and a recharacterization, earlier. Use Code J, Q, or T as appropriate in box 7. Use Code 8 or P, if applicable, in box 7 with Code J. Do not combine Code Q or T with any other codes.

However, for the distribution of excess Roth IRA contributions, report the gross distribution in box 1 and only the earnings in box 2a. Enter Code J and Code 8 or P in box 7." 

Or Form 1099-R instructions page 11 PFD (bottom left)

An excess deferral is an excess contribution to a work retirement plan like the 401k. A Form 1099-R with code P only would indicate the return of the excess deferral and would be listed on line 1h of Form 1040. Returned excess Roth IRA contributions have to be listed on line 4 of Form 1040.

You had no earnings and therefore you won't see an entry on Form 5329 line 1 and 2.

[fanfare]

Instead of importing an amended 2022 Form 5329, you  are telling TurboTax what the still carried amount would be.

TurboTax is trying to help you.

The treatment for 2023 excess described at the beginning still applies.

@gjgogol 

[gjgogol]

@DanaB27In the event my financial institution will not change it, do I complete a substitute Form 1099R or just simply change the codes in TT?  Below are the HELP instructions from TT but they seem to contradict each other. One says to create substitute 1099R and the other says to simply change it to the correct code. Below I have listed both HELP messages from TT.  I have also attached print screens of the HELP messages (hopefully you can read them):

TT HELP #1:

Substitute Form 1099-R
If your plan administrator doesn't give you Form 1099-R for 2023 (or the one you receive is wrong and your plan administrator refuses to correct it), do your best to obtain the form or correction before completing a substitute on Form 4852.

You'll be required to:
- describe your communications with the plan administrator in your attempt to get the form, and
- attest to the IRS that you were unable to obtain it.

Complete a Form 1099-R as if you actually received the correct form. Enter as much information about the payer as you can, including name, address, and the amounts for 2023. Then complete the information for the substitute form.

TT HELP #2:

For Form 1099-R, enter the distribution codes shown in box 7 on the actual Form 1099-R unless you know that the codes are incorrect.

For Forms CSA-1099-R and CSF-1099-R, enter the codes shown in the Distribution Code box on the actual form unless you know that the codes are incorrect.

Distribution codes are not shown on the actual Form RRB-1099-R. However, a distribution code must be entered. Enter the code or codes that accurately describe the transaction.

It is important that the correct distribution codes be entered. If the codes on the form are incorrect, you should try to obtain a form with the correct codes from the payer. Failing that, enter the codes that accurately describe the transaction.

[DanaB27]

You do not need to amend your 2022 tax return to include the 2023 Form 1099-R for the removed excess contribution since you had a loss. Only earnings would be taxable in 2022.

If you insist on amending your 2022 tax return, then you can enter Form 1099-R as regular Form 1099-R and just enter the correct codes P and J.

[gjgogol]

@DanaB27OK I am confused and I apologize.  I was referring to the code in box 7 on 2023 1099R form that was provided to me.  They have code P only for my 2022 distribution.  I thought you said that it should be codes J and P.  I spoke to my financial institution about changing it and they are reluctant to update the 2023 1099R form.  My question is what do I do if they don't update the 2023 1099R form to include both codes J and P?

[DanaB27]

Yes, the 2023 Form 1099-R should have code P and J for the removal of a 2022 excess contribution removed in 2023 according the the Form 1099-R Instructions.

If your financial institution refuses to correct the code I would document that they refuse to use the correct codes according to the Form 1099-R instructions and keep it for your records.  

Like mentioned above you had no taxable earnings and therefore nothings is entered as taxable in box 2a and therefore you do not need to amend your 2022 tax return to add the 2023 Form 1099-R with code P (which should be P and J). 

You also do not need to add it on your 2023 tax return because code P tells TurboTax it belongs on the 2022 tax return.