1099-R Code P for Roth IRA Excess Contribution designated for Prior Year

[1099RHelp]

In January 2021, I contributed to a Roth IRA, designating it as a 2020 contribution. In March 2021, I discovered that I contributed too much, so I had the excess contribution (plus earnings) withdrawn. TurboTax Online had this message regarding excess contributions designated for the prior year: 

"If you made the contribution to your Roth IRA in 2021 (between January 1, 2021 and the 2020 filing deadline without extensions), but you designated it as a 2020 contribution, and you withdrew it in 2021, the Form 1099-R you get will be for 2021. Include the Form 1099-R on your 2021 return. Your Form 1099-R will have a code 8 and a code J in box 7."

However, once I got my 2021 1099-R, it has codes P and J instead though which would require me to amend my 2020 return. I was expecting codes 8 and J based on that guidance from the TurboTax tool and that the earnings would be taxable in 2021. I haven't had success talking with the brokerage. Is the TurboTax pop-up message accurate, and my 1099-R is incorrect? Or do I need to amend my 2020 return?

Any advice is appreciated. Thank you!

[Cynthiad66]

Form 1099-R. You will receive Form 1099-R indicating the amount of the withdrawal. If the excess contribution was made in a previous tax year, the form will indicate the year in which the earnings are taxable.

You will get a 1099-R 2021 in 2022 with codes P and J. This 1099-R will have to be included on your 2020 tax return and you have two options: 

• You can wait until you receive the 1099-R  2021 in 2022 and amend your 2020 return or
• Then you must enter the 2021 1099-R into the 2021 tax return since the withholding is reported in the year that the tax was withheld. The 2021 code P will not do anything in 2021 tax return but the withholding will be applied to 2021.

To create a 1099-R in your 2020 return please follow the steps below:

1. Open your return
2. Click on the "Search" on the top and type “1099-R”
3. Click on “Jump to 1099-R”
4. Select "I'll type it in myself"
5. Box 1 enter total distribution (contribution plus earning)
6. Box 2 enter the earnings
7. Box 7 enter P and J 
8. On the "Which year on Form 1099-R" screen say that this is a 2021 1099-R.

 Yes, you may have to pay the 10% penalty on the earnings. This will trigger Form 5329 in TurboTax.

[1099RHelp]

Thanks Cynthiad66. 

So does that mean that the message in TurboTax online that is in the original post is incorrect? I was expecting codes J and 8 on my 2021 1099-R like the popup message in the tool had said because the contribution and withdrawal both occurred in 2021.

[Cynthiad66]

A corrected copy of the form 1099-R will be needed to change the Distribution codes.

To correct the distribution codes will require the Brokerage to submit a corrected form 1099R to the IRS and to you.

A correction to Form 1099-R is transmitted by completing the corrected 1096 form instructions and sending both forms to the appropriate IRS Service Center.

@1099RHelp

[1099RHelp]

Thanks again, Cynthiad66.

My brokerage is telling me that the message is incorrect and that Code P is accurate on the form as the contribution was designated for 2020 even though the contribution and withdrawal actually both happened in 2021. I would suggest that the message be changed in TurboTax, because that is what led me to not typing in a 1099-R myself last year which would have made the process easier than having to amend my 2020 taxes now. 

[DanaB27]

Yes, Code P is correct for an excess contribution made for 2020 and withdrawn in 2021. Please see How do I amend my 2020 return?

@1099RHelp