Don't deserve "Additional tax on IRAs and similar accounts"

[macrocephalia]

My tax summary indicates "Additional tax on IRAs and similar accounts" of $462 but I can't tell why. 

Can it be related to the excess contributions to my traditional IRA and Roth I mistakenly made? I contacted my broker immediately, who indicated they couldn't block the transfer, and advised me to file a disbursement for each, which I did. This is represented on the forms so far.

[DanaB27 · Accepted solution]

To clarify, you requested the withdrawal of excess contribution plus earnings? Did you indicate on the penalty screen that you withdrew the the excess contribution:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Enter the contribution
4. Continue until the penalty screen and enter the excess contribution amount withdrawn.

Please note, the earnings will be taxable in the year the contribution was made. 

If you made an excess Roth IRA contribution in 2024 and withdrew the 2024 excess Roth IRA contribution plus earnings in 2025 before the due date, then you will get a 2025 Form 1099-R in 2026 with codes P and J. This 1099-R will have to be included on your 2024 tax return and you have two options:  

• You can wait until you receive the 2025 Form 1099-R in 2026 and amend your 2024 return or
• You can report it now in your 2024 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 2025 Form 1099-R into the 2025 tax return since the withholdings are reported in the year that the tax was withheld. The 2025 code P will not add anything to your income in the 2025 tax return but the withholdings will be applied to 2025.

To enter a 2025 Form 1099-R in your 2024 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 2024?"
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 "Is the IRA/SEP/SIMPLE box on this 1099-R checked?" screen answer "No, the box is blank"?
11. On the "Which year on Form 1099-R" screen say that this is a 2025 Form 1099-R.
12. Click "Continue" after all 1099-R are entered and answer all the questions.
13. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2023" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2024.

If you made an excess Traditional IRA contribution in 2024 and withdrew the 2024 excess Traditional IRA contribution plus earnings in 2025 before the due date, then you will get a 2025 Form 1099-R in 2026 with code P and 1.

To create a Form 1099-R in your 2024 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 2024?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2 enter the earnings
8. Box 7 enter P and 1
9. Check the "IRA/ SEP/ SIMPLE" box
10. Click "Continue"
11. On the "Which year on Form 1099-R" screen say that this is a 2025 1099-R.
12. Click "Continue" after all 1099-R are entered and answer all the questions.
13. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

[macrocephalia]

Hi! Thank you--that's great to know, so I'll remember to look for a 1099-R next year. 

I'll double check, but think I requested the withdrawal of excess contribution plus earnings (though the contribution wasn't invested and was taken back out so fast I don't see how there could be earnings).

It sounds like you're confident the tax is somehow on earnings, and I can enter zero earnings ✔️

[DaveF1006]

If there are no earnings, then none of this is taxable.

[macrocephalia]

OK I got through the IRA and Roth corrective distributions (thank you!), but now my Balance due so far reads even more: $506. I'm having trouble figuring out why it went up. The corrective changes are the only ones I've made, so could they cause this? Balance due was about $50 a couple weeks ago, so this is getting very confusing.

[DanaB27]

It would be helpful to have a TurboTax ".tax2024" file to see what is going on. 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 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 and add @DanaB27 . This will allow us to open a copy of your return without seeing any personal information.  

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 and add @DanaB27 . 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.