1099-R contains codes 'PJ'. Any way to avoid filing an amendment ?

[ahmadka2]

In 2020 I made excess Roth IRA contributions without realizing that Roth IRA's have an income limit. Then in February/March last year when I was preparing my 2020 tax filing, I realized that those Roth IRA contributions are all in excess. So I withdrew all the contributions and their earnings, however now I've received a 1099-R showing the codes 'PJ'. TurboTax is advising me that I need to file an amendment for the 2020 tax filing that I filed last year and include this 1099-R in that 2020 amended tax filing.

Filing an amendment is a hassle (which I've never done before as well), so is there any way to avoid doing that ?? Can I not just include this 1099-R in this the 2021 tax return that I'm preparing now, and perhaps include a letter of explanation ?

Also, if I absolutely have to file 2020 tax filing amendment, and I include this 1099-R in that amendment, then do I still include this 1099-R in the 2021 tax filing that I'm preparing now ?

[DanaB27]

Yes, you will have to amend your 2020 tax return when you have a Form 1099-R with codes PJ since the earnings are taxable in 2020. Please see How do I amend my 2020 return?

No, you don't have to enter the 2021 Form 1099-R with codes PJ on your 2021 return unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. 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.

[ahmadka2]

Okay. I have already added the 1099-Rs which mention codes P & J in my 2021 tax return. I understand that since they're meant for 2020 tax year, they won't do anything for the 2021 tax return. But can I still leave them in my 2021 tax return, just to be careful ?

I will obviously file an amendment for my 2020 tax return later and include them there too.

[DanaB27]

Yes, you can leave the 2021 Form 1099-R with codes P & J on your 2021 return the code P won’t do anything on your return when you indicate that it is a 2021 Form. Only taxes withheld would be applied to 2021.

@ahmadka2

[ahmadka2]

Okay so I have the 1099-R's in my 2021 return, even though they're applicable for the 2020 tax year, however I now have a concern:

I'm currently at the stage where I've paid for the TurboTax filing service but have not actually e-filed yet. I was just given the option to see the final forms prepared by TurboTax, which would be e-filed. In these forms, I see 2 forms 5329 attached, each of which mention $6000 as 'excess contributions' in 2020 for my and my wife's Roth IRA accounts. I think *technically* this isn't correct since as per the IRS, if I make excess contribution but then I withdraw it and it's associated earnings before filing taxes for the year in which the contributions were made (2020 in my case), then it would be as if those excess contributions were not made to begin with.

I'm concerned here because this section of the form 5329 says:

"Complete this part if you contributed more to your Roth IRAs for 2021 than is allowable or you had an amount on line 25 of your 2020 Form 5329."

The first statement isn't true since I didn't make any contributions in 2021, and the second won't be true even after my 2020 amended return since the net 2020 contributions would be $6000 (initial excess contribution) - $6000 (withdrawn before filing 2020 tax return) = $0. So I think my 2020 amended return won't even include any form 5329 to begin with - just the earnings would be taxed as normal.

So what should I do about this ? Should I remove these 1099-R's from my 2021 tax return, and/or change anything else ?

Please note that I'll be filing my 2020 return amendment in the next few weeks, which will include these 1099-Rs too in any case.

[DanaB27 · Accepted solution]

Yes, it seems that the excess contribution got carried over. But you do not have an excess contribution since you removed it before the 2020 due date. Please follow these steps to delete the wrong excess contribution entry:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Enter Excess Contributions" screen delete the excess contribution from prior years.
5. Repeat for your wife

You might want to check if you have the excess contribution penalty on your 2020 return (Form 5329 part IV. If you do have the 6% penalty, then follow these steps to remove it:

1. Click on "Search" on the top right and type “IRA contributions” 
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Continue until you get to the penalty screen and enter the contribution amount $6,000 as removed by the due date.

Please be aware, if you are under 59 ½ then you will have to pay the 10% early withdrawal penalty on the earnings on your 2020 tax return (calculated on Form 5329 part I. If you are over 59 ½ in 2020 then please follow these steps when you enter your 2021 Form 1099-R codes PJ on your 2020 tax return:

1. Click on the "Search" on the top right and type “1099-R” 
2. Click on “Jump to 1099-R”
3. Answer "Yes" to "Did you get a 1099-R in 2021?"
4. Enter you Form 1099-R
5. On the "Which year on Form 1099-R" screen say that this is a 2021 1099-R.
6. Click "Continue" after all 1099-R are entered and answer all the questions.
7. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" if you are over 59 1/2 (if you are under 59 1/2 click "Continue")

@ahmadka2

[ljsister2024]

similar situation here, excess contribution to Roth IRA in 2022 and removed it before due date in April 2023, received 1099 R with PJ code in 2024, can I simply remove the excess contribution 1099 R for roth ira with a PJ code? The hard part is TurboTax 2022 cannot be updated or opened to file an amendment. Thank you. 

[RobertB4444]

If the excess contribution was reported on last year's return and reported as removed on last year's return then the 1099-R that you received is covered and you don't need to enter it.  You already did.  

If you did not enter it on your 2022 return then go ahead and enter it on your 2023 return.  You can still check that you withdrew it before the due date of this return because obviously you did.

@ljsister2024 

[ljsister2024]

Thank you @RobertB4444 , which form should I check for both 2022 return and 2023 return for IRA?

I tried to report it in 2023 return, after entering 1099 R code with PJ, TurboTax asks me to amend my 2022 return, while my 2022 return cannot be opened or updated. 

Assuming I reinstall the 2022 TurboTax from CD, would that remove all my 2022 tax return information?

Thank you. 

[DanaB27]

On your 2022 tax return you can check if you do not have a Form 5329 with Part IV which calculates the 6% penalty for Roth IRA excess contributions. If you have a penalty calculated on Form 5329  Part IV then this would indicate that you didn't enter the contribution as removed on the penalty screen during the IRA contribution interview. 

Or you can check the IRA contribution worksheet if you entered a Roth IRA contribution on line 19. Any withdrawals before the due date would be on line 25. 

The 2023 Form 1099-R with code P and J needs to be reported on your 2022 return. You only need to enter it on your 2023 tax return if you had taxes withheld. Only the earnings in box 2a will be taxable and listed on line 4b of the 2022 Form 1040. You can check your 2022 Form 1040 line 4 if you had created a Form 1099-R for the return of excess contribution plus earnings. 

If you did not create a Form 1099-R when you filed your 2022 tax return then you will have to amend your 2022 tax return:

1. Click on the "Search" on the top right and type “1099-R” 
2. Click on “Jump to 1099-R”
3. Answer "Yes" to "Did you get a 1099-R in 2023?"
4. Enter the Form 1099-R and click "Continue"
5. On the "Which year on Form 1099-R" screen say that this is a 2023 Form 1099-R.
6. Click "Continue" after all 1099-R are entered and answer all the questions.
7. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective Distributions made on or after December 31, 2022"

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2022" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2023.

No, installing TurboTax 2022 should not affect your 2022 file.  You should have the 2022 tax file saved separately on your computer.

@ljsister2024 

[ljsister2024]

Thank you @DanaB27 My 1099R in 2023 with a code of PJ has a loss, distribution is 5800 (contribution 6000 in 2022) and my 2a is 0. I returned the excess contribution before the filing deadline in 2023. In that case, I don't need to amend my 2022 tax return, right?

I saw your response to another similar case here: https://ttlc.intuit.com/community/taxes/discussion/[product key removed]ved-for-jp-j-early-distribut..., (No, you do not need to amend your 2022 tax return. You do not need to enter contribution since you withdrew the contribution before the due date. You also don't need enter the Form 1099-R with code JP on your 2022 return because it will not change anything on the 2022 return since you had a loss. You had no taxable event since only earnings are taxable with the return of excess contributions. All that TurboTax would do is add an explanation statement. ) please help to confirm. 

Thanks a lot,

[DanaB27]

Yes, that is correct. You don't need to amend your 2022 tax return since with a loss you have no taxable income to report. All that TurboTax would do is add an explanation statement when you enter the Form 1099-R with PJ with a loss.

@ljsister2024 

[ljsister2024]

Thanks a lot for your advice. @DanaB27