topic How do I fix "You Have an Excess Roth Contribution" when it was a rollover from a traditional IRA so it wasn't excess, and I made no new contributions? in Retirement tax questions

How do I fix "You Have an Excess Roth Contribution" when it was a rollover from a traditional IRA so it wasn't excess, and I made no new contributions?

TonyL1 — Mon, 05 Apr 2021 21:33:56 GMT

TurboTax is treating the IRA to Roth rollover as a new contribution. It's not. How do I fix this?

Re: How do I fix "You Have an Excess Roth Contribution" when it was a rollover from a traditional...

ColeenD3 — Mon, 05 Apr 2021 21:45:13 GMT

Please see this answer from AndreaG.

To report the Traditional IRA distribution and the conversion contribution:

log in to your Turbo Tax account
click on "take me to my return"
click on the "federal taxes" tab
click on "wages and income"
choose "show more and "see list of all income"
scroll down to "retirement plans and social security"
click on "start" next to "IRAs, 401(k), etc"
enter the information for your 1099R
Turbo Tax will ask you questions about your Traditional IRA distribution
When you reach the screen that says, "what did you do with the money?", choose the option that says, "I moved the money to another retirement account"
After you choose this option, another set of options will appear:
If you converted the entire distribution to a Roth IRA, choose "I converted all of this money to a Roth IRA"
If you only converted some of the distribution to a Roth IRA, choose, "I did a combination of rolling over, converting, and cashing out the money." If you choose this option, Turbo Tax will ask you to identify how much of the distribution was converted to a Roth IRA, and how much of the distribution was rolled over into another retirement plan.
Next you will the screen that says, "your 1099R entries". Scroll down to the bottom of the page and click "continue". Turbo Tax will ask you more questions and you will need your 5498 Form for your Traditional IRA. A year end statement might also provide the necessary information.

Re: How do I fix "You Have an Excess Roth Contribution" when it was a rollover from a traditional...

TonyL1 — Tue, 06 Apr 2021 00:07:41 GMT

Thank you, Coleen - the steps you outlined are great, and I followed them exactly (and re-visited every section just to be sure). I specifically marked "I converted all of this money to a Roth IRA".

However, the problem is still there - the message keeps popping up later, after the income and deductions get "wrapped up":

- You Have an Excess Roth Contribution

- You Currently Have a Penalty

I am sure I followed your instructions to the letter.

Will this penalty show up as a separate line item in the final steps, or it it lumped into the tax total so it can't be seen? I got almost to the end and I didn't see any "Penalty" line item.

Re: How do I fix "You Have an Excess Roth Contribution" when it was a rollover from a traditional...

TonyL1 — Tue, 06 Apr 2021 00:48:52 GMT

I see the penalty at the end - it shows up as "Other Tax". It shouldn't be there - I made zero contributions to any IRAs, traditional or Roth, in 2020. This was a rollover of existing traditional IRA funds, yet TurboTax is treating them as a new excess contribution to an IRA. Please help!

Re: How do I fix "You Have an Excess Roth Contribution" when it was a rollover from a traditional...

TonyL1 — Tue, 06 Apr 2021 03:33:06 GMT

I just removed the Roth IRA contribution entirely. If anyone asks, it was never a contribution - it was a rollover. TurboTax lets you say it in the Income section, but not in the Deductions section.

Re: How do I fix "You Have an Excess Roth Contribution" when it was a rollover from a traditional...

DanaB27 — Tue, 06 Apr 2021 13:32:39 GMT

Yes, if you rolled over or converted a distribution you will only enter it in the 1099-R section and you do not enter it as as a contribution in the IRA contribution section under Deductions & Credits.