1099R Taxable amount not determined

[HarleyandJen]

We have a 2021 1099R from a Roth IRA for a distribution that was the removal of excess Roth contributions in 2019. The total distribution was ~10k (7k excess contribution plus it's earnings)

Box 2a is blank, and taxable amount undetermined is checked. How do we handle this in Turbotax?

We have amended 2019 return to pay 6% penalty on the 7k excess, but how do we report the 1099? In 2019?

I  believe only the earnings (~3k) are taxable as normal gains plus 10% penalty for early withdrawal?

Just don't seem to get there in Turbotax.

Thanx for any help

PC

[DanaB27 · Accepted solution]

Yes, you will have to pay the 6% penalty for 2019 and 2020 since you didn't withdraw the excess contribution by December 31, 2020.  

Since you withdrew the excess contribution after the 2019 due date it will be treated as a regular distribution (you didn't need to withdrawn the earnings). You Form 1099-R should have code J in box 7. Please make sure that you enter your net contributions in the follow-up questions:

1. Click on "Search" on the top and type “1099-R” 
2. Click on “Jump to 1099-R” and enter all your 1099-Rs
3. Click "Continue" on the "Review your 1099-R info" screen
4. Answer all the questions and make sure you enter the net contributions prior to 2021 on the "Enter Prior Year Roth IRA Contributions" screen (the net contribution will include any excess contribution not removed by the due date, in your case the $7,000 excess from 2019).
5. Answer the remaining question.

 No, you will not have a taxable income unless you withdrew more than your prior net contributions. If you did then your earnings will be taxable and subject to the 10% early withdrawal penalty if you are under 50 1/2.

[taxman17]

The amended return should take care of the 6% penalty for the excess contribution.

In order to determine the taxability of the distribution in 2021 google " A comprehensive guide to tax treatments of Roth IRA distributions"

[HarleyandJen]

OK, since this was a 2019 excess contribution, is that 1099R and all the prior contributions and info done in our 2019 amended return?

[taxman17]

In the 2019 return the 6% penalty for the excess contribution should be reported on the IRS 5329 form.

The distribution that you received to correct the excess should be reported on the 2012 taxes. To determine the taxability of the distribution refer to "A Comprehensive Guide to Tax Treatments of Roth IRA Distributions" found on the internet.

[DanaB27]

No, you will enter the 2021 Form 1099-R on your 2021 tax return.  For the net contributions you will add all contributions from 2020 and prior years (including the 2019 excess contribution) minus any distributions from 2020 and prior years.

@HarleyandJen

[HarleyandJen]

OK, in our 2021 return, when TTax says "Enter Excess contributions from prior years", do we need to state the 14K? Or is that Zero now since the excesses were withdrawn (with earnings) in 2021?

[DanaB27 · Accepted solution]

You will enter the $14,000 on the "Enter Excess contributions from prior years" screen. Then on Form 5329, it will show this on line 18 and the distribution on line 20. This will show the IRS that you removed the excess contribution from 2019.

@HarleyandJen

[HarleyandJen]

OK when i enter the 2021 1099R on the 2021 return, and enter the PJ code (P says excess contibutions and earnings taxable in 2020). Then TurboTax says, "Your 1099R reports earnings on contributions you made in 2020. This information needs to go on your 2020 return...you'll need to amend it."

So do we enter it in 2020 AND 2021?

Confused.

[DanaB27]

It seems that you got the wrong code in box 7. For a removal after the due date the code in box 7 should be J not PJ. It seems you have gotten the Form 10099-R for the removal of a 2020 excess contribution plus earnings before the due date of the 2020 tax return. This would have to be put on your 2020 return.

You might have to check with your financial institute about the wrong code.

Please see How do I file an IRS extension (Form 4868) for additional information. 

@HarleyandJen