This is in large a rehash of a question that I've asked before but now it is more specifically directed towards how to do the entries correctly in TurboTax. But I will revisit the circumstances, to try to make this cleaner and more to the point, than the original post for the widest applicability to be of interest to others.
Background: because of the mistake below and one other small correction I will file an amended return
Income generated from a transfer error caused me to exceed IRA contribution income limits and resulted in;
- The removal of what became an excess Roth IRA contribution for myself
- The removal of a traditional IRA contribution for my wife; hers was allowed but not deductible and no longer desirable.
Both Roth and Traditional IRA contributions were made mid Fed 2024
Filing and acceptance of the Federal Return was in mid Feb, 2024
(A Federal refund was left in to be applied to the 2024 taxes.)
Post filing and finding the distribution transfer error.
Both IRA contributions have been reversed (removed) along with any earnings as calculated by the broker.
The Roth excess contribution (with earnings) was removed in June of 2024.
The Traditional IRA contribution (with earnings) was removed in July of 2024
My understanding beyond that; (with thanks for to those who guided me previously)
- The income / earnings associated from each of the removals needs to be reported as Misc. income with a note explaining the income.
- Regarding the Wife’s Traditional IRA removal, I do not enter an IRA contribution for hers in TurboTax since it was allowed but removed before 6 months after the April 15 filing deadline. As mentioned above, I just need to report the income earned it earned while sheltered.
The language in TurboTax for the ROTH is what I’m hung up on, for the excess contribution that I had to remove. Below is a synopsis of the TurboTax step by step entries
Roth IRA Contribution:
Include Contributions made between January 1st 2024 and April 15th 2024 on your 2023 return. (Yes I made a contribution)
Roth Contribution $7500 (and no it was not switched or recharacterized)
Was the ROTH IRA opened before 2023? YES
Enter excess contribution for prior years. 0
Enter ROTH IRA Value as of Dec 31th 2023 Done
Turbotax Now calculates that my income is too high to contribute to the Roth and that it is considered an excess contribution.
Here’s the issue, the next TurboTax question:
Enter any contribution that you withdrew before April 15th, 2024 or (or October 15th 2024 if you’re filing an extension) Note: that there is NO mention of an amended return.
Contribution Withdrawn Before the due date of your return. 0
I withdrew the contribution but not before the filing deadline of April 15th and that’s the end of the TurboTax IRA entry questions. If I file as I answered above the Roth contribution which has been removed gets left in as excess.
Would I be correct in that since this is an amended return, the “Due Date” is October 15th and how I should really answer the question is:
Contribution Withdrawn Before the due date of your return. 7500
If I’m correct and it should be entered as shown just above, it appears to mean, I’m not penalized (far as I can tell) for having made and removed either the Roth or the Traditional IRA contributions as long as they were removed before October 15th, other than any penalties and interest I might owe as a consequence of not having paid enough tax originally.
And just for clarification: The Due Date of Oct 15th doesn't really apply to filing an amended return (as it does to filing an extension), in this case it is just the due date to remove the IRA contributions.
Back in late June after discovering the mistake, I sent the IRS a substantial payment to cover the potential interest and underpayment penalty (after doing a worst case test run in TurboTax).
Thanks in advance for any answers and again for those I received previously to get this far!
