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

[macuser_22]

A code PJ in a 2021 1099-R means a return of Roth contribution "taxable in 2020".

When you file your 2020 tax return is immaterial.   You are not going to get the 1099-R until next January.

*IF* you requested a return of contributions due to an excess contribution and the excess was removed before the extended due date of the 2020 tax return and the earnings were also returned and you know that the IRA custodian will report this as a return of contribution and not as a normal Roth distribution but as a return of contribution with a code "JP" in box 7 - then:

You can just report it now and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or box 14 State withholding. Then you must also enter the 2021 1099-R into the 2021 tax return since the withholding is reported in the year that the tax was withheld.

The 2021 code JP will not do anything in 2021 but the withholding will be applied to 2021.

You would enter the 1099-R with the total distribution in box 1 (the contribution plus the earnings),

The earnings in box 2a,

Enter code "P" in box 7 (Top) - don t worry that it will say "taxable in 2019 "

Enter code "J" in box 7 (Bottom).

On the "Which year" screen say that this is a 2021 1099-R. - That makes it taxable in 2020 and not 2019

After the 1099-R summary screen press continue.

If you are over 59 1/2 then on the "Lets see if we can lower your tax bill" enter the box 2a amount in the "Another Reason" box to eliminate the 10% early withdrawal penalty on the earnings.

Enter the explanation for the excess contribution and that you are reporting a 2021 1099-R on your 2020 tax return to avoid having to amend in 2021.

The box 2a earnings will be taxable income reported on line 4b on the 1040 form and if under age 59 1/2 will also be subject to a 10% penalty on a 5329 form that will be reported on line 59 on the 1040 Schedule 4 form.

[ahmadka2]

Thanks @macuser_22 for your help.

Okay so if I report the 1099-R now before actually receiving it next year, what do I put in for all these other boxes that TurboTax asks for ?:

Box 3 - Capital gain

Box 6 - Net unrealized appreciation

Box 8 - Other

Box 8 - Percent

Box 9a - Your percentage of total distribution

Box 9b - Total employee contributions

Box 10 - Amount allocable to IRR within 5 years

Box 11 - 1st year of designated Roth contribution

Account number

Box 13 - Date of payment

Also as I mentioned earlier in this thread, TurboTax also asks for the EIN and Address of the brokerage which held my Roth IRA account. I got these values from the brokerage's customer service but what if they turn out to be different from what's on the 1099-R when I receive it next year ? Would that require an amendment in it's own right ?

Same question for the boxes indicated above. I think they don't matter much but I can't say for sure.

[macuser_22]

Leave them all blank.

As I said - unless  you *know* what the financial institution  is going to put on box 1, 2a and 7 then wait for the real 1099-R to arrive.

And yes, if the real 1099-R is different that will require that you amend.

[ahmadka2]

Given what you've suggested, I don't feel super comfortable reporting the 1099-R now as there can be human error in what they tell me, and then I'd have to amend anyway. So I'm preferring to just do an amendment next year for 2020 and include it in that. Regarding this, I have a few questions:

1) Besides taking the time to do the amendment next year, is there any other negative aspect of going with this route, especially from IRS's perspective ? ... For example, would there be any additional interest and/penalties for waiting till next year to report these earnings through an amendment ?

2)  Do I report the contributions I made (which later got removed) ? If yes, I assume I would need to report the withdrawal in TurboTax too right ?

3) Assuming the answer is 'yes' for both questions in #2 above, if I do that, won't the IRS be wondering why I didn't report the earnings based on that excess contrition, and ONLY reported the contribution itself which was later removed ? Because they will know through form 5498 that they get from the brokerage that I made Roth IRA contributions in 2020.

4) Would I need to attach a statement with my 2020 tax return on why I'm not reporting the earnings on those excess contributions now ?

5) Could waiting till next year to report the 1099-R through an amendment increase the chance of an audit, either this year or when I do the amendment ?

[macuser_22]

The only downside of waiting until next year is the inconvenience of amending.

Nothing about a Roth contribution goes on a tax return.   IRS matching of 1099-R's are usually 1-2 years after the form is issued.

[ahmadka2]

okay thanks, can you also answer the other questions I mentioned please ?

[katekatekate]

hi, 

I made 2 contributions in 2020 for 2019 and 2020, both are excess and I had them returned in May 2021. I am trying to amend my 2020 returns. My questions are: 

1. I paid 6% penalty on both contributions on the original 2020 federal tax I filed already, but now with the adjustment I seem to only get refund for 6% of one of the contribution. 

thank you so much

[macuser_22]

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@katekatekate wrote:

hi, 

I made 2 contributions in 2020 for 2019 and 2020, both are excess and I had them returned in May 2021. I am trying to amend my 2020 returns. My questions are: 

1. I paid 6% penalty on both contributions on the original 2020 federal tax I filed already, but now with the adjustment I seem to only get refund for 6% of one of the contribution. How can I fix this? My understanding is that I returned the contribution before Oct 2021 and I don/t need to pay 6% on the contribution amount. 

---

Your understanding is not correct.    For the 2019 excess to avoid the 2019 penalty it has to be removed before the 2019 due date which was July 15, 2020.   So you need to file a 2019 5329 for and pay the 2019 6% penalty.   But that penalty repeats each year until removed  so you also need to file a 2020 5329 with another 6 penalty for the 2019 contribution.

For 2020, IF you either filed for an extension OR filed you 2020 tax return on time before May 17, 2021, then you have until Oct 15, 2021 to have a "return of contribution" plus earnings.   Only the returned earnings will be taxable if the resulting 1099-R has a code JP in box 7.

[katekatekate]

thank you so much!

do you think what you said about paying 6% for 2019 is true even if the contribution for 2019 was actually made in 2020? I would only be able to receive form 5498 for year 2020. 

also do you have any idea what was wrong for my state tax?

[macuser_22]

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@katekatekate wrote:

thank you so much!

do you think what you said about paying 6% for 2019 is true even if the contribution for 2019 was actually made in 2020? I would only be able to receive form 5498 for year 2020. 

if that is true, I guess in essence  the fact that I only got 6% of one of the returned contribution back is correct. 

also do you have any idea what was wrong for my state tax?

---

A contribution *for* 2019 made *in* 2020 is till a 2019 contribution reported on a 2019 tax return.

(I'm in CA and know nothing about NY tax).

[katekatekate]

thanks a lot!

[Firstpoint]

Hello, 

I have a similar issue (I made an excess contribution in 2022 and withdrew the excess in 2023). I called the IRS and asked them about the two options discussed in this thread (file a dummy 1099-R, or wait to amend the 2022 tax return in 2024). The agent suggested that I do two things instead: 1) Input the distribution and any gains on the 1040 line 4a and 4b, and then 2) attach a letter explaining my situation (made excess contribution but removed excess by tax filing due date)

Do you know how I can access 1040 to made this edit? 

thanks

[BrittanyS]

Can you clarify if you have already filed and need to amend or do you just need steps on where to enter the 1099?

@Firstpoint 

[Firstpoint]

Hello, 

I have not yet filed and I did not receive a 1099-R from the custodian of the roth IRA because the distribution was made in 2023. However, i have to report the distribution on my 2022 return. 

[AbrahamT]

If you know you’ll be receiving a Form 1099-R next year with a Code P and want to avoid the need to amend a return, include the data in the tax return in the current year with a Code 8. You can then ignore the Form 1099-R with the Code P when you receive it a year later. (Code 8 indicates that the amount is taxable in the tax return you are currently working on, and Code P indicates the amount is taxable in the prior tax year.)  See HERE

pg. 15, 16 and 17 for a guide of the codes. particlarly pg. 15 and 17 for code 8 and P.