Roth IRA Excess Contribution

[mr_rj]

Hello All,

I had an excess contribution of around 2k which I withdrew from the account (Out of which only 1696 (2000-115) minus 10% tax) was deposited to my account. Total contributions were around 5k with a negative income attributable of around $-115. I read some other questions and I will be filing 1099-R for 2022 based on the suggestions there that falls under "wages and income". Under "Deductions and Credit," should I enter 2021 contributions as 5k or 3k (5k-2k)? If I enter 5k, there's an additional tax of around $120 dollars. If I enter 3k, it still will ask for contribution withdrawn amount. I'm not sure what to enter. Any help will be highly appreciated.  

This is the TurboTax web. 

[DanaB27]

You will enter the original contribution of $5,000 and then enter the $2,000 excess contribution amount as withdrawn before the due date on the penalty screen. 

1. Click on "Search" on the top right and type “IRA contributions” 
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Enter $5,000 you contributed
5. On the penalty screen enter the excess contribution amount (without earnings and losses) of $2,000 as withdrawn by the due date 

You will get a 2022 Form 1099-R  in 2023 with codes P and J for the withdrawal of excess contribution and loss. This 1099-R will have to be included on your 2021 tax return and you have two options:  

• You can wait until you receive the 2022 Form 1099-R in 2023 and amend your 2021 return or
• You can report it now in your 2021 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 2022 Form 1099-R into the 2022 tax return since the withholding is reported in the year that the tax was withheld. The 2022 code P will not do anything to the 2022 tax return but the withholdings will be applied to 2022.

To create a Form 1099-R in your 2021 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 2021?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution minus loss)
7. Box 2a enter $0
8. Box 7 enter J and P
9. Don't enter any tax withholdings in Box 4 and Box 14
10. Click "Continue"
11. On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.

[Anonymous]

As of the 2021 edition - THERE IS A DEFECT IN THE TURBOTAX SOFTWARE.

I had excess roth contributions for 2020 and 2021.  

FIRST - Turbotax did not notify me with a warning that I had an excess contribution.  That would have alerted me to back out the excess immediately through my brokerage firm.

SECOND - after my 2020 taxes were filed in March of 2021, I independently looked up roth limits, realized there was a problem and had the excess roth contributions for 2020 and 2021 backed out.

Now that I am doing 2021 taxes, Turbotax is not calculating that Backed out income as the taxable portion, it is calculating that the ENTIRE amount of what was backed out as income.  It is a defect, both of these issues have caused me financial injury, and I am 36 hours in to calls, chats, etc. with Turbotax product, and CPA staff trying to get the filing corrected (much less having them pay me back for the financial injury they have caused me.).  

BE CAREFUL IF YOU HAVE EXCESS ROTH CONTRIBUTIONS!!!  TURBOTAX DOES NOT ACCOUNT FOR IT CORRRECTLY.