2021 1099-R FOR ROTH IRA EXCESS CONTR FROM 2020 (CODE J,P)

[corbelli]

I received a 2021 1099-R  for my Roth IRA for excess contributions in 2020.

I made a corrective distribution in Jan 2021 prior to sending my 2020 tax return, but I didn't have the 2021 1099-R. I contributed $7000 (I'm over 50)  and my corrective distribution was only $5500, as I lost money that year. 

Do I need to file a 2020 amended return if I had a lost earnings?

Should I have filed anything in my 2020 tax return for this?

[MinhT1]

The loss on your Roth IRA can be deductible subject to conditions.

You must have closed all your Roth IRA accounts (icluding those with positive earnings, if any) and the net loss is deductible as a miscellaneous itemized deduction subject to the 2% of AGI threshold. So if your total itemized deductions do not exceed your standard deduction, then that net loss would have no effect on your taxes.

You do not need to amend your 2020 return.

If you can use your loss in 2021 (under the above conditions), you can claim it on your 2021 tax return.

Please read this TurboTax article for more information.

[corbelli]

You didn’t read my question. It’s concerning earnings from a corrective distribution from a excess contribution.

[RobertB4444]

You don't need to amend 2020 as the distribution occurred in 2021.  Since it was a Roth contribution that you had to pull back there were no tax ramifications for the year that you contributed. 

Since the loss occurred inside the Roth you don't get a deduction for it and you don't need to report it, provided everything is entered properly and shows as non-taxable

[davekrause]

I have a similar question:

Reporting excess Roth IRA Contribution

For tax year 2021 I contributed after-tax dollars to a Roth IRA account to later find out I was not eligible to make this contribution. To avoid the 6% I reached out to the brokerage company in early 2022 and have already withdrawn the contributions along with the earnings on them.  I understand that I will not receive a 1099-R in 2022 that indicates this access contribution removal, but I should report the earnings as income on form 1040, and fill out form 5329 for my 2021 return. Do I also fill out a 1099-R in TurboTax 2021 to file with my return. If so, what codes should I select for Box 7, do I also fill in boxes 8, 9a and 9b? If I originally set up the Roth Account in 2019 do I enter that info in Box 11?

[macuser_22]

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@davekrause wrote:

I have a similar question:

Reporting excess Roth IRA Contribution

For tax year 2021 I contributed after-tax dollars to a Roth IRA account to later find out I was not eligible to make this contribution. To avoid the 6% I reached out to the brokerage company in early 2022 and have already withdrawn the contributions along with the earnings on them.  I understand that I will not receive a 1099-R in 2022 that indicates this access contribution removal, but I should report the earnings as income on form 1040, and fill out form 5329 for my 2021 return. Do I also fill out a 1099-R in TurboTax 2021 to file with my return. If so, what codes should I select for Box 7, do I also fill in boxes 8, 9a and 9b? If I originally set up the Roth Account in 2019 do I enter that info in Box 11?

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If you had a return of contribution in 2022 for a 2021 contribution then by law, then IRA custodian must send a 2022 1099-R no later the Jan 31 2023.    However, that is still reportable on your 2021 tax return.

*IF* you requested a return of contributions due to an excess contribution and the excess was removed before the extended due date of the 2021 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 2022 1099-R into the 2022 tax return since the withholding is reported in the year that the tax was withheld.

The 2022 code JP will not do anything in 2022 but the withholding will be applied to 2022.

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 2022 1099-R. - That makes it taxable in 2021 and not 2022

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 2022 1099-R on your 2021 tax return to avoid having to amend in 2022.

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.

Nothing goes in any other box.

[Wynter2020]

I have a similar situation and here are the details:

1)  Contributed to Roth IRA for 2020 but was ineligible due to no earned income.

2)  Did not realized 2020's contribution was ineligible until 2021 when it was returned plus gains.

3)  Received a 2021 1099-R showing the return of contributions plus gains and the gains were shown as taxable on line 2a.   

4)  Line 4 shows tax w/h of $200

5)  Line 7 shows codes J, P

6)  I was 59 1/2 as of 1/1/20 should that be a variable 

When I am filling out my 2021 tax return in Turbo Tax it is suggesting I may need to file an amended return for 2020.

I completed the amended return using Turbo Tax 2020 and numerous areas on my tax return were affected and here are my questions:

1)  To make the change/update I simply went to income section for 1099-R's of Turbo Tax and added the 1099-R from 2021, however, I can't use the codes J,P because then it would indicate the removal is from 2019 and not 2020.  Thus, what codes should be used on the amended return?    Does it matter since that detail is not going to IRA in the 1040-X return?

2)  Turbo Tax did not generate form 5329 so I assume that is correct and there should not be any penalties.  Is that correct?   Something in prior msgs was mentioned about removal being timely but I am NOT sure how timely is defined in my case.

3)  When I entered the 1099-R in my 2021 return with the codes on the 1099-R Turbo Tax did not include the amount shown on line 2a in my total income which makes sense.  However, even though it did remove the income from total 2021 income is did not remove the tax withheld shown on line 2a of that same 1099-R.   Thus, I assume the tax I had w/h having to do with this transaction correcting the ineligible 2020 Roth contribution will actually reduce taxes in 2021 and not  in 2020 where an amended return for the gains is to be filed.   Is that correct?

Any "clear" help would be most appreciated.   Thank you.

[macuser_22]

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@Wynter2020 wrote:

I have a similar situation and here are the details:

1)  Contributed to Roth IRA for 2020 but was ineligible due to no earned income.

2)  Did not realized 2020's contribution was ineligible until 2021 when it was returned plus gains.

3)  Received a 2021 1099-R showing the return of contributions plus gains and the gains were shown as taxable on line 2a.   

4)  Line 4 shows tax w/h of $200

5)  Line 7 shows codes J, P

6)  I was 59 1/2 as of 1/1/20 should that be a variable 

When I am filling out my 2021 tax return in Turbo Tax it is suggesting I may need to file an amended return for 2020.

I completed the amended return using Turbo Tax 2020 and numerous areas on my tax return were affected and here are my questions:

1)  To make the change/update I simply went to income section for 1099-R's of Turbo Tax and added the 1099-R from 2021, however, I can't use the codes J,P because then it would indicate the removal is from 2019 and not 2020.  Thus, what codes should be used on the amended return?    Does it matter since that detail is not going to IRA in the 1040-X return?

2)  Turbo Tax did not generate form 5329 so I assume that is correct and there should not be any penalties.  Is that correct?   Something in prior msgs was mentioned about removal being timely but I am NOT sure how timely is defined in my case.

3)  When I entered the 1099-R in my 2021 return with the codes on the 1099-R Turbo Tax did not include the amount shown on line 2a in my total income which makes sense.  However, even though it did remove the income from total 2021 income is did not remove the tax withheld shown on line 2a of that same 1099-R.   Thus, I assume the tax I had w/h having to do with this transaction correcting the ineligible 2020 Roth contribution will actually reduce taxes in 2021 and not  in 2020 where an amended return for the gains is to be filed.   Is that correct?

Any "clear" help would be most appreciated.   Thank you.

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1) JP is the correct code.   TurboTax assumes you are entering a 2020 1099-R but When you enter a 2021 1099-R code P into TurboTax 2020 it will ask if this is a 2020 or 2021 1099-R.  Say 2020 that advances the year by one so 2019 becomes 2020.

2) No 5329 is needed forr this because there is no penalty.

3)  Any tax withheld in box 4 (not box 2a - box 2a is the tax on the earnings) on the 2021 1099-R can only be reported on your 2021 tax return, not 2020.     The returned contribution must be reported in the tax year the contribution was *for* (2020) but the withholding was done in 2021.  That is why it makes no sense to have tax withholding on a return of contribution that spans tax years.

[Davesilb]

I have the exact same situation, except I'm under 59. If I'm understanding correctly, what I need to do now is:

1) Report the federal withholding amount from the 2021 1099-R on my 2021 return. Unhappily, this causes Turbotax to increase my audit risk to High because I'm reporting a withholding amount that's higher than the taxable amount of the distribution (which is $0 since Turbotax sees the distribution as taxable in 2020 only)

2) File an amended 2020 return to report the taxable earnings on the excess contribution and pay the 10% early withdrawal penalty because I'm under 59

[DanaB27]

Yes, you will need to amend your 2020 tax return if you received a 2021 Form 1099-R with code PJ. Please see How do I amend my 2020 return?

Yes, the earnings will be taxable income and will also be subject to the 10% early withdrawal penalty because you are under 59 1/2.

Yes, if you had tax withholdings on your 2021 Form 1099-R then you will have to enter the form on your 2021 tax return to have the taxes applies to 2021. 

@Davesilb

[tdc2022]

I filed my 2020 return and realized after the fact that I am ineligible to contribute to a Roth in 2020.   In Sept 2021, I withdrew the excess 2020 contribution with the earnings and filed an amended return already paying for the tax on the earnings and penalty since I'm under 59.5.  However, when I received the 2021 1099-R, the distribution code used by Vanguard was J and 8, instead of J nd P.  Code 8 is Excess contributions plus earnings/excess deferrals taxable in 2021.   It seems like I am paying for the excess tax again.  How should this be handled?

[DanaB27]

If you withdrew an excess contribution for 2020 plus earnings in 2021 you should have gotten Form 1099-R with codes P and J. You might have to contact your financial institute to correct your Form 1099-R.

The IRS states:

“You must include in your gross income the interest or other income that was earned on the excess contribution. Report it on your return for the year in which the excess contribution was made.”

Also, if you made the contribution in 2021 for 2020 then you are deemed to have made the contribution to an individual retirement plan on the last day of 2020. (26 U.S. Code § 219 (f) (3))

Therefore, your earnings are taxable in 2020 and your Form 1099-R should have codes P and J.

@ tdc2022

[aa73]

I have a similar situation. I had an excess contribution in 2020. I'm under 59. In 2020 I filed a 5329 form. This year I received a 2021 1099 R. I understand I need to amend my 2020 return. Do I also report the 1099 R in my 2021 return? No federal income tax was withheld.

[macuser_22]

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@aa73 wrote:

I have a similar situation. I had an excess contribution in 2020. I'm under 59. In 2020 I filed a 5329 form. This year I received a 2021 1099 R. I understand I need to amend my 2020 return. Do I also report the 1099 R in my 2021 return? No federal income tax was withheld.

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What code is in box 7? 

What is in box 2a?

[aa73]

Box 7 has "PJ" and Box 2a has an amount smaller than the gross distribution in Box 1.