1099-R for 2020 not generated until 2021

[scuba_climber]

Hello,

In March of 2021, I removed an excess contribution and its earnings from my Roth IRA for 2020.

I am aware that the interest I just removed  is taxable in  2020, but the 1099-R will not be generated until 2021.  Can I report this amount on my 2020 return before receiving the 1099-R or must I wait until next year and file an ammended return?

[macuser_22]

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@scuba_climber wrote:

Hello,

In March of 2021, I removed an excess contribution and its earnings from my Roth IRA for 2020.

I am aware that the interest I just removed  is taxable in  2020, but the 1099-R will not be generated until 2021.  Can I report this amount on my 2020 return before receiving the 1099-R or must I wait until next year and file an ammended return?

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*IF* you requested a return of contributions due to an excess contribution and the excess was removed before the extended due date of the 2020 tax return and the earnings were also returned and you know that the IRA custodian will report this as a return of contribution and not as a normal Roth distribution but as a return of contribution with a code "JP" in box 7 - then:

You can just report it now 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 also 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 JP will not do anything in 2021 but the withholding will be applied to 2021.

You would enter the 1099-R with the total distribution in box 1 (the contribution plus the earnings),

The earnings in box 2a,

Enter code "P" in box 7 (Top) - don t worry that it will say "taxable in 2019 "

Enter code "J" in box 7 (Bottom).

On the "Which year" screen say that this is a 2021 1099-R. - That makes it taxable in 2020 and not 2019

After the 1099-R summary screen press continue.

If you are over 59 1/2 then on the "Lets see if we can lower your tax bill" enter the box 2a amount in the "Another Reason" box to eliminate the 10% early withdrawal penalty on the earnings.

Enter the explanation for the excess contribution and that you are reporting a 2021 1099-R on your 2019 tax return to avoid having to amend in 2021.

The box 2a earnings will be taxable income reported on line 4b on the 1040 form and if under age 59 1/2 will also be subject to a 10% penalty on a 5329 form that will be reported on line 59 on the 1040 Schedule 4 form.

[scuba_climber]

Thank you!

[scuba_climber]

Thanks again for your very helpful advice,

I have one more question:

I needed to make this withdrawal because I contributed the full amount for 2020 and subsequently lost my job due to the pandemic.  This reduced my earned income for the year to an amount less than the yearly maximum contribution that I had already made.  Now, as I enter the 1099-R information into TurboTax, I am being asked if I used the money to pay for health insurance premiums while unemployed.  This situation does apply to me, though I'm not sure that this deduction is meant to count against earnings on excess withdrawals.  Can I take this deduction or should I leave the field blank?

thank you

[macuser_22]

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@scuba_climber wrote:

Thanks again for your very helpful advice,

I have one more question:

I needed to make this withdrawal because I contributed the full amount for 2020 and subsequently lost my job due to the pandemic.  This reduced my earned income for the year to an amount less than the yearly maximum contribution that I had already made.  Now, as I enter the 1099-R information into TurboTax, I am being asked if I used the money to pay for health insurance premiums while unemployed.  This situation does apply to me, though I'm not sure that this deduction is meant to count against earnings on excess withdrawals.  Can I take this deduction or should I leave the field blank?

thank you

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If you are referring to this screen then this is the IRS rule in Pub 590-B

https://www.irs.gov/publications/p590b#en_US_2019_publink1000231064

Medical insurance.

Even if you are under age 59½, you may not have to pay the 10% additional tax on distributions during the year that aren't more than the amount you paid during the year for medical insurance for yourself, your spouse, and your dependents. You won't have to pay the tax on these amounts if all of the following conditions apply.

• You lost your job.

• You received unemployment compensation paid under any federal or state law for 12 consecutive weeks because you lost your job.

• You receive the distributions during either the year you received the unemployment compensation or the following year.

• You receive the distributions no later than 60 days after you have been reemployed.

[scuba_climber]

thanks again,

Yes, that is the screen I was referring to and yes that IRS page makes it sound like I could deduct the amount spent on health insurance.

This page, however seems to say that I cannot:

  https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...

its very confusing!

[macuser_22]

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@scuba_climber wrote:

thanks again,

Yes, that is the screen I was referring to and yes that IRS page makes it sound like I could deduct the amount spent on health insurance.

This page, however seems to say that I cannot:

  https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...

its very confusing!

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That link says that you *can* for an IRA.   (And so do the IRS rules I posted above).

[scuba_climber]

Am I misunderstanding?

I thought that this section was indicating that you cant for earnings returned

Returned IRA Contributions
if withdrawn by extended due date of return	n/a	yes	408(d)(4)
earnings on these returned contributions	n/a	no	408(d)(4)

[macuser_22]

Apples and oranges - different things.  If you put the money in your pocket it is not exempt, if used for insurance it is.   That simplified chart does not take all possibilities into consideration, the IRS rules in pub 590-B do.