topic I'm filing an amended return for a withdrawal of an excess IRA contribution. Why am I being charged additional tax when I withdrew the money before the 2019 tax deadline? in Retirement tax questions

I'm filing an amended return for a withdrawal of an excess IRA contribution. Why am I being charged additional tax when I withdrew the money before the 2019 tax deadline?

waxing_gibbous — Sat, 27 Mar 2021 22:28:08 GMT

I filed my 2019 taxes in march of 2020. When doing the taxes I realized that I no longer qualified for a Roth IRA contribution. I had already made the contribution in January of 2019. I contacted my plan administrator and they withdrew the $6,000 contribution plus the excess earnings on that money and deposited it in my bank account on April 3rd of 2020. They stated I would get a 1099-R for the excess contribution in January of 2021 and to file an amended return for 2019.

I am working in TurboTax to file my amended return return for 2019. It has correctly calculated the tax I need to pay for the excess earnings. However, TurboTax has also applied a 6% additional tax on the $6000 contribution that I made. Shouldn't I not need to pay the additional tax because the excess contribution and additional earning were removed before the 2019 tax deadline? If so, how can I remove the additional tax and file the amended tax return?

Re: I'm filing an amended return for a withdrawal of an excess IRA contribution. Why am I being charged additional tax when I withdrew the money before the 2019 tax deadline?

macuser_22 — Sat, 27 Mar 2021 22:38:50 GMT

Sounds like you entered the contribution in the IRA contributions interview and did not remove it.

Go to the contribution interview and remove it.

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

Re: I'm filing an amended return for a withdrawal of an excess IRA contribution. Why am I being charged additional tax when I withdrew the money before the 2019 tax deadline?

waxing_gibbous — Tue, 30 Mar 2021 01:06:50 GMT

Ultimately this ended up solving the issue I was having with my amended return.

I removed the IRA contribution from my return. During review of the tax return I was prompted to answer a few questions to fill in some lines on the amended return. I don't think I answered them correctly, because it close to doubled the tax I owed. I canceled the amended return to start over again. But canceling the amended tax return does not return you back to the original state. So now I had my tax return without the IRA contribution and without the 1099-R withdrawal of the original contribution. However, this time when I went through the process of amending the return I was prompted to import the 1099-R forms, and I ended up going through a questionnaire which asked me if I had contributed to the IRA and then withdrawn those contributions. Everything was then calculated correctly.

So, perhaps it has something to do with the order of entry for the IRA contribution and 1099-R withdrawal? I am not sure, but removing the IRA contribution, canceling the amended return, and starting over again a few times and re-entering some of the data did the trick for me.