Excess Roth IRA Contributions

[ptt87]

• I made excess contributions to my Roth IRA in 2021 due to my income exceeding the maximum limit for contributions.
• By the time I figured this out I had already made three 2022 contributions as well.  My contributions have always been set up to be withdrawn from my checking account automatically.    
• I withdrew both my 2021 and 2022 contributions (and gains) prior to the deadline for filing my 2021 tax return. 
• I entered the 2021 withdrawal into my 2021 return (created a 1099-R).  Based on guidance I found on TurboTax help last year this was permissible instead of waiting for the actual 1099-R.
• This year I received the actual 2022 1099-R.  The Gross Distribution is a total of the 2021 and 2022 contributions.

My question is....how do I enter this into Turbo Tax?  If I enter the 1099-R into my 2022 tax return as is, I will be reporting my withdrawn 2021 contributions for a second time.

Thank you.

[MaryK4]

Because you withdrew before the tax filing deadline, you do not have to pay tax on the contributions, just any income earned while the excess was in the account.  You have to report the income in the year it is earned which is why TurboTax always let you know if you overcontributed, otherwise you have to pay the penalty for the prior year.  The gross distribution is reported , but the taxable amount should only be the interest.

[ptt87]

Thank you for the quick reply.

So do I enter the 1099-R into Turbo Tax as is, which reflects both year's withdrawals?

[MaryK4]

Yes, you can enter the 1099-R as it is- just remember NOT to enter them as Roth Contributions this year (or you may get the same warning- the most important thing is that the income (interest) gets reported in 2022.

[ptt87]

So I won't be taxed twice for the interest since I already reported it on my 2021 return?  Just to clarify, my 2022 1099-R contains the total of both year's withdrawal amounts.  The total amount was withdrawn in 2022, but I already reported the 2021 portion on my 2021 return.

Thank you for your patience.

[ThomasM125]

You have to make two entries to report the Form 1099-R. The first one you enter the distribution that belongs in 2021 and use code P in box 7 (excess earnings and contributions taxable in 2021.) The entry won't show as taxable on your 2022 return. The second entry you enter as listed on the form but for an amount less the 2021 contribution you reported on your 2021 return.

[ptt87]

Thank you Thomas. 

I made two entries as you advised.  Both times Turbo Tax "said"  that I may need to amend my 2021 return.