topic Code 1 indicates a regular distribution from your traditi... in Retirement tax questions

2017 put 5500 after tax earnings into TRADITIONAL IRA but could not use deduct as I made to much -money was in there about a week, now getting hit with penalty??

BIRDMAN12 — Tue, 04 Jun 2019 19:31:53 GMT

I tried to lower my taxable income for 2016 by putting 5500 into a TRADITONAL IRA 1-2017 but it did not help as my income was too high so a week later I pulled it out with zero profit and now I am getting hit with a 10% penalty.....is that normal or I am out of luck---thanks

There is no tax deduction for a Roth IRA contribution.

ghost — Tue, 04 Jun 2019 19:31:54 GMT

There is no tax deduction for a Roth IRA contribution.

sorry, was a traditional IRA---not a Roth

BIRDMAN12 — Tue, 04 Jun 2019 19:31:56 GMT

sorry, was a traditional IRA---not a Roth

IRA/SEP/SIMPLE box is checked

BIRDMAN12 — Tue, 04 Jun 2019 19:31:57 GMT

IRA/SEP/SIMPLE box is checked

The penalty is for early withdrawal (under age 59 1/2) I...

ghost — Tue, 04 Jun 2019 19:31:59 GMT

The penalty is for early withdrawal (under age 59 1/2) I expect. There are IRA experts here that will undoubtably offer better guidance than I. @dmertz

Did you have any other money in traditional IRAs on Decem...

dmertz — Tue, 04 Jun 2019 19:32:00 GMT

Did you have any other money in traditional IRAs on December 31, 2017?
What is the code in box 7 of the From 1099-R?

code 1 and $0--I put it in and took it out a week later w...

BIRDMAN12 — Tue, 04 Jun 2019 19:32:02 GMT

code 1 and $0--I put it in and took it out a week later when I realized it would not help with my 2016 taxes

Code 1 indicates a regular distribution from your traditi...

dmertz — Tue, 04 Jun 2019 19:32:03 GMT

Code 1 indicates a regular distribution from your traditional IRA, not a return of contribution.

The original contribution needed to be reported on your 2016 tax return with a 2016 Form 8606. The result should have been $5,500 on line 14 of the Form 8606. If you did not do this, you'll need to file submit a properly prepared 2016 Form 8606. Since you filed a 2016 tax return, the instructions for Form 8606 indicate to submit the Form 8606 with Form 1040X. The Form 1040X will show the IRS that you are not simply changing a deductible traditional IRA contribution to a nondeductible contribution.

https://www.irs.gov/pub/irs-prior/f8606--2016.pdf

With regard to your 2017 tax return, enter the Form 1099-R, in the immediate follow-up indicate that you "Did something else with the money," i.e., you did not roll it over to another retirement account. On the Your 1099-R Entries page, click the Continue button and in the additional follow-up answer Yes, you made nondeductible traditional IRA contributions an enter $5,500 as the amount that you contributed for years prior to 2017. Enter $0 as your December 31, 2017 balance in traditional IRAs. TurboTax will prepare 2017 Form 8606 to determine that the $5,500 is a nontaxable distribution of your basis in traditional IRA contributions and therefore also not subject to penalty.

Had you requested a return of contribution in 2017 instead of a regular distribution, the distribution would have negated the original contribution, making it as if the original contribution had never happened. Since you obtained a regular distribution instead, you have a separate contribution and distribution, both of which must be reported as I described above.

so I need to amend my 2016 return with form 8606 or just...

BIRDMAN12 — Tue, 04 Jun 2019 19:32:04 GMT

so I need to amend my 2016 return with form 8606 or just do it all on my 2017 taxes? and thanks for your help

You need to amend your 2016 tax return to report the nond...

dmertz — Tue, 04 Jun 2019 19:32:06 GMT

You need to amend your 2016 tax return to report the nondeductible contribution on Form 8606.

My answer assumes that you did not make any Roth IRA cont...

dmertz — Tue, 04 Jun 2019 19:32:07 GMT

My answer assumes that you did not make any Roth IRA contribution for 2016.

so when I do it it only asks what my balance was at end o...

BIRDMAN12 — Tue, 04 Jun 2019 19:32:09 GMT

so when I do it it only asks what my balance was at end of 2016, not 2017--I put money in the IRA in 2017 and pulled out 2017 since it was not deductible---why is it asking me about 2016 and not 2017?

this is what it says: Let us know if you made and kept tr...

BIRDMAN12 — Tue, 04 Jun 2019 19:32:10 GMT

this is what it says: Let us know if you made and kept track of any nondeductible contributions to your traditional IRA from 2016 or prior years. (This is not common.)

Which year TurboTax are you asking about, 2016 TurboTax t...

dmertz — Tue, 04 Jun 2019 19:32:11 GMT

Which year TurboTax are you asking about, 2016 TurboTax to amend your 2016 tax return to add the nondeductible traditional IRA contribution and prepare 2016 Form 8606 or 2017 TurboTax to report the distribution that you received in 2017?

I am an idiot---I amended 2016 with that form and forgot...

BIRDMAN12 — Tue, 04 Jun 2019 19:32:13 GMT

I am an idiot---I amended 2016 with that form and forgot that although I put the 5500 in there 1/2017 it was actually for tax year 2016 so I got confused-lol

Blame Congress. They didn't make any of this easy. ;-)

dmertz — Tue, 04 Jun 2019 19:32:14 GMT

Blame Congress. They didn't make any of this easy. 😉

true---since I just mailed in the 2016 form 8606 how long...

BIRDMAN12 — Tue, 04 Jun 2019 19:32:16 GMT

true---since I just mailed in the 2016 form 8606 how long should I wait to E File 2017?

I see no need to wait. It will probably be at least a ye...

dmertz — Tue, 04 Jun 2019 19:32:17 GMT

I see no need to wait. It will probably be at least a year before the IRS does any cross-checking between years, if they do it at all. You just want the proper filings in place if they ever do eventually perform the cross-checking.

many thanks for helping me out !

BIRDMAN12 — Tue, 04 Jun 2019 19:32:18 GMT

many thanks for helping me out !