Change previous year's Roth withdrawal type ?

[rexnspike]

Hello,

In 2014 I had to remove Roth IRA contributions I had made in that year because I exceeded the contribution income limits.

I had my brokerage withdraw the funds but noticed just now that the 1099 I received reported the withdrawal as a distribution instead of a withdrawal of excess contributions so I paid a penalty.  My questions now is how do I clean up this mess?

1)Do I need to have my broker issue a corrected 1099?

2)Can I recapture the penalty I paid in 2014 tax year?

3)What do I do about earnings on the funds since tax year 2014?

4)Which additional forms or amendments would be required?

3)Anything else which may be helpful for this situation?

Please help,

Thanks in advance  

[dmertz]

Avoiding the penalty for 2014 would have required receiving a gain or loss adjusted distribution of the excess and, if there was a gain, paying tax and possible early-distribution penalty on the gain with your 2014 tax return.  However, you are beyond the 3-year statute of limitations for receiving a refund of the penalty paid, so that's not a possibility.

In what year did you receive the corrective distribution, the year of the Form 1099-R you are referring to?

[rexnspike]

Thank you dmertz, I did not know about the 3 year statute of limitations.

I received the 1099 for the 2014 withdrawal in calendar year 2015 (for 2014 tax year).

Do I / can I request a corrected 1099 from my broker or do I need to request a new withdrawal of excess contribution for calendar year 2014, for which I would receive a new 1099? 

[dmertz]

There is an ongoing discussion with a TurboTax user in a similar situation that might provide you with relevant information:

https://ttlc.intuit.com/community/retirement/discussion/re-excess-traditional-ira-contribution-in-20...

I interpret your reply as indicating that you received a 2014 Form 1099-R in early 2015 which you expected to have code J8 but instead had code J.  It's unlikely that you'll get the broker to make any correction to the Form 1099-R at this late date.

I'm not sure how to resolve this.  Did you report the regular distribution on Form 8606 Part III?  If so, it appears that you still have an excess in the account on which you probably owe a penalty for each year 2015 through 2018 if you did not file Form 5329 for those years.  (If you did not file a Form 5329 showing that you have no excess contribution, to start the statute of limitations clock for assessing the excess-contribution penalty each year never started running since Form 5329 is treated as a separate tax return for this purpose).  Certainly you can treat the excess as still present in the account and make a regular distribution of the excess (without regard for any earnings) to be sure that the excess is eliminated, but not sure that that is necessary.  I don't think that a conversation on this forum is the way to sort out all of the intricacies, so it might be best to seek local advice from a professional familiar with this sort of situation.  (If this was caught earlier, before the statute of limitations on the 2014 tax return expired, the situation would probably be easier to resolve.)