I don't think I should be paying 6% additional tax because the excess contributions were a mistake I immediately did a corrective disbursement to reverse. How do I get that represented on my return?
I made a $7700 Roth contribution and a $300 trad IRA contribution earlier this month for 2024, then reversed both. I already got help creating a 1099-R form and manually entering the corrections: (https://ttlc.intuit.com/community/tax-credits-deductions/... )
If you did not go back to the IRA contribution section and indicate that you withdrew the excess contribution, TurboTax will calculate the penalty and include the 5329. Go back to the section in Deductions & Credits and make sure you are not showing the contributions.
you can't "reverse" it without the custodians help. the custodian has to calculate any earnings, report the earnings to IRS, send them back also and you pay tax on that.
A distribution on your own is just taking money from an IRA which is taxed and penalized, which is not pretty.
@MaryK4 I think I indicated that i withdrew the excess contribution with the manual 1099-R, no? TurboTax shows a tax, but I don't see a penalty. Is the problem that it shows a disbursement but now there's no contribution?
@fanfare Broker/custodian did the disbursements to undo the contributions. There were no earnings on them as it was barely in there. That shouldn't mean tax or penalty, right? (Hence my confusion over this 6%)
If custodian sent you rmoney back and earnings were zero. you can ignore this on your tax return.
It is as if it never happened.
There is nothing to do. (you will get a 1099-R next year which also can be ignored.)
To confirm you did not have an excess contribution for 2023? If that is correct then please remove the entry on the the "Enter Excess Contributions" screen:
@fanfare oh?! Sounds like I should just remove any reference to the contributions then? That's great
@DanaB27 correct, if "did not have an excess contribution" is the same as putting it in then taking it out again right away. Thank you for the instructions—seems like I can just delete all the IRA and Roth entries and be good to go. Thanks!
Try going to IRA contributions under
Federal On left
Deductions and Credits
Then scroll down to Retirement and Investments
Traditional and ROTH IRA Contributions - Click the Start or Update button
@VolvoGirl Thank you! Ok this allows me to "none of the above" my contributions, but when I finish, it shows -$8000 so I must have to access manually somewhere else?
—— UPDATE ——
I found a tool to delete two IRA forms, so I tried that