topic Roth IRA Excess Contribution Confusion in Retirement tax questions

Roth IRA Excess Contribution Confusion

haveridley — Tue, 14 Jan 2020 23:06:31 GMT

During 2018, I contributed $3,483 more than I was allowed to for my Roth IRA due to a low AGI. In February 2019, $3,456.39 was removed from the account (with a $26.61 net loss) and then $3,418.96 was moved as cash to an individual brokerage account, which was then moved to a bank account. I filed my 2018 taxes stating that the full amount of $3,483 was removed (thus, having a contribution of $2,017).

I received my 2019 1099-R for my Roth IRA a couple of days ago. In Box 1 (Gross distribution), the amount is $3,418.96 (the amount of excess contribution removed). In addition, codes J and P are also located on the form. I put this information in TurboTax and it prompted me to amend my 2018 form. I am trying to figure out what went wrong. If the excess contribution was already removed from the IRA with a net loss, what would be wrong with the 2018 form? Do I need to enter the 1099-R form for 2019 f this was resolved?

Re: Roth IRA Excess Contribution Confusion

dmertz — Wed, 15 Jan 2020 14:11:45 GMT

2019 TurboTax is simply reminding you that the effect of your return of contribution needed to be reflected on your 2018 tax return.

Your 2018 tax return should have included an explanation statement for the return of contribution and TurboTax would have prompted you for that explanation if you had entered the 2019 Form 1099-R as if you had already received it. If you did that, you can ignore the 2019 Form 1099-R and 2019 TurboTax's reminder. If you did not do that and your 2018 tax return did not include this explanation statement, since there were no taxable gains you can either wait and see if the IRS detects what it thinks is an uncorrected excess contribution for 2018 and explain it at that time or file an amended 2018 tax return now that only serves to provide that explanation. There is no change in your 2018 tax liability if your 2018 tax return did not include a From 5329 reporting the excess contribution.