What if I don't receive 1099-R in time to file taxes after withdrawing excess Roth IRA contribution ?

[DanaB27]

If you do not feel comfortable to create the 1099-R without receiving the Form 1099-R, then you will have to wait until 2022 and amend your 2020 tax return to report withdrawal of excess contribution and earning when you receive Form 1099-R.

Please see How to amend (change or correct) a return you already filed for additional information.

[Nokabe]

"Is IRA/SEP/SIMPLE checked?"

How should I answer to this question?

Thanks,

[DanaB27]

If you are creating a 1099-R to report the withdrawal of excess IRA contribution and earnings then you will check the IRA/SEP/SIMPLE box and answer "Yes" to "Is IRA/SEP/SIMPLE checked?"

@Nokabe

[ahmadka2]

Hi @DanaB27, I had two more questions to ask:

1) So I have withdrawn the excess contribution (plus its earnings) I made in 2020. If I choose to NOT report a 1099-R on my tax return now and am okay with filing an amendment for 2020 tax return next year (after getting the 2021 1099-R), do I even need to do anything related to my Roth IRA when filing 2020 tax return now ? Do I need to even state on my 2020 tax return now that I contributed to my Roth IRA in 2020, since all of it (plus earnings) is withdrawn now ? If I don't need to deal with any of this, would it create a problem with IRS when they receive a Form 5498 showing contributions I made which I didn't mention in my 2020 tax return ?

2) Hypothetically speaking, suppose I did any other IRA related activity this year which is a taxable event (and so deserves a 1099-R next year), will I get TWO 1099-Rs next year ? One with code P mentioned in Box 7 to indicate it's for contributions made in 2020, and one with code P in Box 7 which relates to the taxable event I do THIS year in 2021 ?

[DanaB27]

1) I would still enter the Roth IRA contribution and enter that you are withdrawing the whole contribution before the due date to be accurate. 

2) Yes, you would get two 1099-Rs one with the code P and another 1099-R (with code 8 if you made another excess contribution for 2021 withdrawn in 2021).

[macuser_22]

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@ahmadka2 wrote:

Hi @DanaB27, I had two more questions to ask:

1) So I have withdrawn the excess contribution (plus its earnings) I made in 2020. If I choose to NOT report a 1099-R on my tax return now and am okay with filing an amendment for 2020 tax return next year (after getting the 2021 1099-R), do I even need to do anything related to my Roth IRA when filing 2020 tax return now ? Do I need to even state on my 2020 tax return now that I contributed to my Roth IRA in 2020, since all of it (plus earnings) is withdrawn now ? If I don't need to deal with any of this, would it create a problem with IRS when they receive a Form 5498 showing contributions I made which I didn't mention in my 2020 tax return ?

2) Hypothetically speaking, suppose I did any other IRA related activity this year which is a taxable event (and so deserves a 1099-R next year), will I get TWO 1099-Rs next year ? One with code P mentioned in Box 7 to indicate it's for contributions made in 2020, and one with code P in Box 7 which relates to the taxable event I do THIS year in 2021 ?

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#1)   Of course you can wait for the actual 1099-R and then amend 2020 to report it.  The ONLY thing that goes on your tax return at all is line 4b on the 1040 form that will have the taxable earnings.     The only reason to enter it now is to avoid having to amend next year.    Also the return for Roth contribution made in 2021 for 2020 will have a code "PJ" in box 7, the total amount returned in box 1 and the earnings in box 2a.

#2)  The 1099-R for the return of contributions will be separate and in additional to any other 1099-R's that you might receive for any other distributions.    Nothing about a return of contribution with a code PJ goes on your 2021 tax return.

You would only enter it now if you *know* from the IRA custodian that the 2021 1099-R will, in fact, have code PJ and you know the box 1 and 2a amounts - otherwise just wait for the real 1099-R next year.

[macuser_22]

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@DanaB27 wrote:

1) I would still enter the Roth IRA contribution and enter that you are withdrawing the whole contribution before the due date to be accurate. 

2) Yes, you would get two 1099-Rs one with the code P and another 1099-R with code 8 (if it is a 2021 excess contribution withdrawn in 2021).

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You only get a separate code 8 1099-R for a return of excess *deferrals* form an employer retirement account such as a 401(k) where the earnings are taxed in the year returned.    Returned IRA earnings are taxable in the year the contribution was *for* not returned.

[DanaB27]

@macuser_22 

Thank you. I understood that the OP asked about another excess contribution for 2021 which he removed in 2021. 

[ahmadka2]

Thanks @DanaB27 & @macuser_22 

I have a few more questions.

1) So if I proactively report the 1099-R that I would get NEXT year now, I assume this will add the IRS form 5329 which calculates the taxes on Roth IRA earning withdrawals ?

2) What if I don't know the exact details of the brokerage's address and TIN which would be mentioned on the 1099-R next year ? I can put in the values their customer service gives me, but they may turn out to be slightly different from what the 1099-R mentions next year. Assuming they roughly match, would it be okay if they're slightly different ? Or can this also require me to file an amendment next year ?

3) What about all the other boxes besides box 1, 2a and 7 ? Do I leave them all blank ?

[macuser_22]

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@ahmadka2 wrote:

Thanks @DanaB27 & @macuser_22 

I have a few more questions.

1) So if I proactively report the 1099-R that I would get NEXT year now, I assume this will add the IRS form 5329 which calculates the taxes on Roth IRA earning withdrawals ?

2) What if I don't know the exact details of the brokerage's address and TIN which would be mentioned on the 1099-R next year ? I can put in the values their customer service gives me, but they may turn out to be slightly different from what the 1099-R mentions next year. Assuming they roughly match, would it be okay if they're slightly different ? Or can this also require me to file an amendment next year ?

3) What about all the other boxes besides box 1, 2a and 7 ? Do I leave them all blank ?

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1 Yes.

2 & 3 You get all of that from the financial in institution so you *know* exactly what they will put in these boxes.     Otherwise just wait for the real 1099-R to arrive.

[ahmadka2]

I have another question.

I chatted with the IRS folks on their helpline and told them about the two options offered in this thread:

- Report the 1099-R now which I'll receive next year, OR

- Wait to actually receive it next year and then file a 2020 amended tax and mention that 1099-R in it

When I told them this, they mentioned that if I go with the second option, I don't have to amend the 2020 tax return, and can instead just file it with the normal 2021 tax return. I called them twice and two different agents said this same thing to me. I assume since the 1099-R will be coded correctly, the IRS can maybe figure out themselves that it's for withdrawing a 2020 excess contribution that was withdrawn in 2021. I also talked with the brokerage where I have my Roth IRA, and they also suggested the same thing.

So are you sure I would need to do an 2020 amendment if I wait to actually receive the 1099-R form next year ?

[macuser_22]

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@ahmadka2 wrote:

I have another question.

I chatted with the IRS folks on their helpline and told them about the two options offered in this thread:

- Report the 1099-R now which I'll receive next year, OR

- Wait to actually receive it next year and then file a 2020 amended tax and mention that 1099-R in it

When I told them this, they mentioned that if I go with the second option, I don't have to amend the 2020 tax return, and can instead just file it with the normal 2021 tax return. I called them twice and two different agents said this same thing to me. I assume since the 1099-R will be coded correctly, the IRS can maybe figure out themselves that it's for withdrawing a 2020 excess contribution that was withdrawn in 2021. I also talked with the brokerage where I have my Roth IRA, and they also suggested the same thing.

So are you sure I would need to do an 2020 amendment if I wait to actually receive the 1099-R form next year ?

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If the 1099-R has an amount in box 2a, then yes, that must be reported on the 2020 tax return.   Either the agents did not understand or they gave misleading or incorrect  information.

[ahmadka2]

Why does it HAVE to be included in the 2020 tax return ? If I receive the 1099-R next year and it is coded properly to indicate that it's relating to removal of excess 2020 contribution, then why can't it just be included with the 2021 tax return ?

Can you give any specifics from an IRS publication to support your claim of needing an amendment as opposed to just including the 1099-R (which is coded properly to indicate that it was for removal of excess contribution) with the next year's return ?

[macuser_22]

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@ahmadka2 wrote:

Why does it HAVE to be included in the 2020 tax return ? If I receive the 1099-R next year and it is coded properly to indicate that it's relating to removal of excess 2020 contribution, then why can't it just be included with the 2021 tax return ?

Can you give any specifics from an IRS publication to support your claim of needing an amendment as opposed to just including the 1099-R (which is coded properly to indicate that it was for removal of excess contribution) with the next year's return ?

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https://www.irs.gov/instructions/i1099r

P—Excess contributions plus earnings/excess deferrals taxable in 2020.

See the explanation for Code 8. The IRS suggests that anyone using Code P for the refund of an IRA contribution under section 408(d)(4), including excess Roth IRA contributions, advise payees, at the time the distribution is made, that the earnings are taxable in the year in which the contributions were made.

1, 2, 4, B, or J

https://www.irs.gov/publications/p590a#en_US_2020_publink1000230703

Contributions Returned Before Due Date of Return

If you made IRA contributions in 2020, you can withdraw them tax free by the due date of your return. If you have an extension of time to file your return, you can withdraw them tax free by the extended due date. You can do this if, for each contribution you withdraw, both of the following conditions apply.

• You didn’t take a deduction for the contribution.

• You withdraw any interest or other income earned on the contribution. You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. If there was a loss, the net income earned on the contribution may be a negative amount.

Note.

If you timely filed your 2020 tax return without withdrawing a contribution that you made in 2020, you can still have the contribution returned to you within 6 months of the due date of your 2020 tax return, excluding extensions. If you do, file an amended return w

[ahmadka2]

So the last quote you mentioned (which is saying "If you do, file an amended return") is referring to only the scenario where you withdraw the excess contribution and earnings after filing the taxes. This isn't the case for me as I've already withdrawn my excess contribution and their earnings, before having filed tax return for last year.

I understand that the earnings are taxable in the year in which the original contribution was made. I get that. But since the 1099-R form I receive next year will have the code 'P' on it, won't it automatically correspond to will my 2020 tax return even if I file it with my 2021 tax return ?? ... If the code 'P' was NOT mentioned in next year's 1099-R, then I would agree that an amendment would be needed to manually connect that 1099-R to my tax return that I will file now for last year.