Solved: Why is my returned overcontribution to my Roth IRA taxable?
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chrob61
Level 1

Why is my returned overcontribution to my Roth IRA taxable?

In 2018, I mistakenly over contributed to my Roth IRA because my income level was too high.   So I had Fidelity return the excess contribution to my savings account.    Why would I have to pay tax on that?  The money came from my savings account and was returned to my savings account.

1 Best answer

Accepted Solutions
DanaB
Intuit Alumni

Why is my returned overcontribution to my Roth IRA taxable?

You should have gotten a 1099-R for the withdraw of the excess contribution plus earnings. The code in box 7 should show that it was a withdraw of excess contributions plus earnings (code 8 or P). And only the earnings should be taxable. The 1099-R needs to be entered in TurboTax.

From Publication 590-AFor purposes of determining excess contributions, any contribution that is withdrawn on or before the due date (including extensions) for filing your tax return for the year is treated as an amount not contributed. This treatment only applies if any earnings on the contributions are also withdrawn. The earnings are considered earned and received in the year the excess contribution was made.

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4 Replies
chrob61
Level 1

Why is my returned overcontribution to my Roth IRA taxable?

Please see my comment, I found that I reported the gain in 2017 on form 5329.
DanaB
Intuit Alumni

Why is my returned overcontribution to my Roth IRA taxable?

If you have already reported the earnings from withdrawing the excess contributions then there shouldn't be anything else you need to do.
DanaB
Intuit Alumni

Why is my returned overcontribution to my Roth IRA taxable?

You should have gotten a 1099-R for the withdraw of the excess contribution plus earnings. The code in box 7 should show that it was a withdraw of excess contributions plus earnings (code 8 or P). And only the earnings should be taxable. The 1099-R needs to be entered in TurboTax.

From Publication 590-AFor purposes of determining excess contributions, any contribution that is withdrawn on or before the due date (including extensions) for filing your tax return for the year is treated as an amount not contributed. This treatment only applies if any earnings on the contributions are also withdrawn. The earnings are considered earned and received in the year the excess contribution was made.

View solution in original post

chrob61
Level 1

Why is my returned overcontribution to my Roth IRA taxable?

Thank you.   I went to go and do my amended return, when I went to my state tax return, Michigan 2017, Form 5329 Line 18 "enter your excess contributions from line 24 of your 2016 Form 5329".  I entered the earnings amount there and they calculated the additional tax.  So maybe I won't need to amend this return after all?
I filed the taxable gain in 2017 using the 5329 form.
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