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?
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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:
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..
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