Excess Contribution to ROTH IRA and Dummy 1099-R

[CindyLou3]

While doing my taxes, I discovered that I made an excess contribution to my Roth IRA in 2021 and was able to remove the excess contribution and earnings ahead of filing.  I found the prior threads regarding creating a dummy 1099-R in order to report the earnings and 10% penalty (under 59 1/2 years of age) on my 2021 federal tax return.  After responding to the TT questions, it appears that TT generated a 5329 form which includes the 10% penalty in Part I (which seems correct), but also lists the excess contribution on line 18 and a 6% additional tax on that contribution on line 25 of Part IV (which seems like the 6% penalty that I avoided by having the contribution and gains removed before filing my tax return).  Also, I was unable to find any advice/instruction in the threads with respect to how to respond to the TT question that comes up for my California state tax return with respect to the earnings.   Thank you.

[DanaB27]

You will enter the excess contribution amount withdrawn by the due date (without earnings and losses) on the penalty screen during the IRA contribution interview to avoid that TurboTax calculates the 6% penalty:

1. Click on "Search" on the top right and type “IRA contributions” 
2. Click on “Jump to IRA contributions"
3. Continue through the interview until you get to the penalty screen. Enter the contribution amount without earnings and losses as withdrawn by the due date on the penalty screen.

On your CA state return, your earnings will be listed on the "Additional Tax on Early Distribution" screen under "non-SIMPLE Plans" since you are under 59 1/2.

[CindyLou3]

Thank you.  I have gone back through and re-answered the questions, but the amount keeps showing up on Line 25 of the 5239.  I even went back and removed the dummy 1099-R and while that removed the 10% tax on earnings from my 1040 and the 5239, the $7,000 is still showing on Line 25 along with the corresponding 6% penalty.  As a final attempt, I went back and said that I didn't contribute at all in 2021 and the 5239 with the penalty is still appearing in my tax documents when I preview.  Can't figure out what I am doing incorrectly.

[DanaB27]

Another spot you can check is "Enter Excess Contributions" screen. 

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Do you have any Excess Roth Contributions" answer "Yes"
5. On the "Enter Excess Contributions" screen and delete any entry

@CindyLou3

[CindyLou3]

Thank you, Dana.  I did that and it has removed the information from my 1040 (line 4a & 4b now blank), but when I do a print preview of my return, forms and schedules (before the e-filing steps), there is still a Schedule 2 with the penalty taxes included on line 8 and still a Schedule 5239 with 6% penalty on line 25 included.  Seems like those two forms should no longer be included in my filing documents as I have removed the dummy 1099-R and have said that I withdrew the excess contribution before filing when responding to TT IRA contribution questions.  

[DanaB27]

To verify, you have entered the excess contribution amount as withdrawn on the penalty screen?

 

[CindyLou3]

Correct.  I have entered it as withdrawn before filing/due date, just as you show below.

[DanaB27]

It would be helpful to have a TurboTax ".tax2021" file that is experiencing this issue. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Download: 

1. On your menu bar at the very top, click "Online"
2. Select "Send Tax File to Agent"  
3. Click "Send"
4. The pop-up will have a token number
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

The instructions for TurboTax Online: 

1. From the left menu select Tax Tools. 
2. Then select Tools below Tax Tools. 
3. A window will pop up which says Tools Center.  
4. On this screen, select Share my file with Agent. 
5. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number. 
6. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

[CindyLou3]

Thank you so much for your assistance.  The token number is 996716.

[DanaB27]

I reviewed your return. You have a $7,000 entry on the "Enter Excess Contributions" screen. As mentioned before, this needs to be blank or $0. 

Please follow these steps to delete the entry:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Enter Excess Contributions" screen delete the entry.

@CindyLou3

[CindyLou3]

I went back through and made sure to say "0" to every question I was asked regarding a Roth IRA contribution, including the follow-up and correction questions and that did the trick.  Schedule 2 and 5239 are now gone from my return.  Thank you so much for your assistance and patience.