Hello,
I need to pay the 6% penalty on a Roth IRA contribution. How do I do that in TT? It's very confusing where to go and what to input.
Please walk me through where I can pay the penalty in TT.
Thank you
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If you reported the ROTH IRA contribution on your tax return in 2021, and it was an excess contribution, there should have been a penalty applied based on the information you entered on your tax return. If not, then you'll have to amend that return to reflect the contribution so the penalty will be assessed. You will see an option to amend your 2021 tax return on your home page screen in TurboTax.
For 2022, you need to go through the IRA contribution entries and indicate that you had an excess contribution in 2021 that has not been corrected. You find that in the Deductions and Credits screen , then Retirement and Investments, then Traditional and Roth IRA contributions. You will see a screen that says Do You Have any Excess Contributions, to which you answer "yes" and you can enter your excess contributions from 2021.
You will get a Form 1099-R in 2024 which will represent tax year 2023 with code P in box 7 . If it is coded properly when you enter it in TurboTax the distribution will not show as taxable in 2023, since you didn't have any earnings.
Thank you ThomasM125
With regards to the 2022, I made the edit per your suggestion. However, no penalty was assessed. Moreover, TT says is asking, "Indicate how much of your remaining excess contribution of $7,000 you want to credit toward your 2022 Roth IRA contributions." I put zero. But TT says this is an error and I get this message, "IRA Contributions Worksheet Line 26 - Taxpayer's excess Roth IRA contribution credit should be equal to $7,000, the Roth IRA contribution credit from Form 5329, Part IV." It asks me to enter 7,000 for Line 26. And that shows up on my Deductions and Credits this year as 7,000 which is incorrect.
What can I do?
You would get that message if you were allowed to do an IRA contribution of $7,000 in 2022. If you had excess contributions from 2021 you get a credit for them in 2022 up to the amount of your allowed contribution in 2022. So, it appears there is at least $7,000 of earned income on your 2022 tax return. If you look on your form 1040, page one, can you clarify what line numbers have $7,000 or more of income listed on them?
You can view your form 1040 and schedules 1 to 3 while working in the online version of TurboTax by following these steps:
This is the same problem I have with the 2021 filing I think. TT thinks my deferred comp is earned income. Here's what I see:
1a. 67,047
1z. 67,047
2b. 11,116
3b. 11,871
5a. 23,617 (rollover - moved from 401K to Trad IRA)
When I entered in my deferred comp - I scanned the doc so the system picked it up. Box 14 on my W2 is noted as "67,047 DCP". I don't know how else I could or should have entered it.
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