Contributions withdrawn before due date

[ragavi98]

Hi! There's a section in deductions and credits under the roth ira in which it asks for Contributions withdrawn before due date. I contributed the max amount allowed for 2022 which was 6000 but due to my salary I could not contribute that much without being taxed. I only found that out while filling out my tax return. I'd like to withdraw X amount so I'm not taxed 6 % on it. There's an form to withdraw the X amount on td ameritrade that I'm going to submit by the 18th, but it takes time for them to withdraw the amount and I don't think it'll be done by April 18th, 2023. It will be done though by October 15th, 2023. 

Should I indicate that the contribution withdrawn before the due date is X amount or should I put 0 since it'll potentially take longer than April 18th to withdraw X amount? I'm going to file my tax return by April 18th, 2023.

[ThomasM125]

You need to do an extension on your tax return and then you will not be penalized as long as you withdraw the excess by the due date of the extension. You will indicate in TurboTax that you withdrew the excess by the due date of your tax return.

[ragavi98]

Got it so I would make sure that the amount is removed, then indicate that I removed X amount, and then file my return?

Is it possible for me to not request an extension and file my return now- by April 18th and state on TurboTax I removed the excess funds? I would actually remove the excess funds by October 15th. I just submitted my form to TD ameritrade regarding removing the excess funds, but it may take after April 18th to process that request.

[DanaB27]

Yes, you can file by April 18th and state that you removed the excess contribution. Please see the Withdrawal of excess contributions for additional information.

You will get a 2023 Form 1099-R  in 2024 with codes P and J for the withdrawal of excess contributions and earnings. This 1099-R will have to be included on your 2022 tax return and you have two options:  

• You can wait until you receive the 2023 Form 1099-R in 2024 and amend your 2022 return or
• You can report it now in your 2022 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2023 Form 1099-R into the 2023 tax return since the withholdings are reported in the year that the tax was withheld. The 2023 code P will not do anything to the 2023 tax return but the withholdings will be applied to 2023.

To create a Form 1099-R in your 2022 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2022?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter J and P
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2023 Form 1099-R.
11. Click "Continue" after all 1099-R are entered and answer all the questions.
12. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" if you are over 59 1/2 (if you are under 59 1/2 and removed the excess after December 29, 2022, then enter it next to "Corrective Distributions made on or after December 31, 2022")

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2021" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.