Do you report Roth IRA Contributions

[sridharm]

Hi

I submitted amended Year 2019 and 2020 returns and IRS approved and subsequently also removed excess contribution for Year 2019 and Year 2020 in 2022 from brokerage provider. We also removed Roth IRA excess contribution of 2021 by 18th April 2022 deadline.

Now I am ready to file taxes for year 2022 and received 1099R for removal of excess Roth contribution from brokerages. Now what I need to keep in mind and things to do in TurboTax while filing 2022 taxes.

Thank you for your support.

Regards

Sri

[Opus 17]

@sridharm 

What are the codes in box 7 of the 1099-R?

[sridharm]

Thank you for your prompt reply. For myself  (TD Ameritrade) the code is J,P and for my wife (vanguard)  it is 8,J.

Regards,

Sri

[Opus 17]

---

@sridharm wrote:

Thank you for your prompt reply. For myself  (TD Ameritrade) the code is J,P and for my wife (vanguard)  it is 8,J.

Regards,

Sri

---

JP indicates a return of excess contributions where the earnings were taxable in the prior year (2021, for a 2022 from 1099-R. The earnings should be in box 2 while box 1 will report the entire amount of the withdrawal.  This is appropriate if you withdrew excess contributions made for the 2021 tax year, even if the withdrawal occurred in 2022.  You should have already reported the earnings as taxable on your 2021 tax return.  You need to enter the 1099-R on your tax return, but neither the contributions nor the earnings should be taxable in 2022.

8J indicates a return of excess contributions where the earnings are taxable in the current year (2022).  he earnings should be in box 2 while box 1 will report the entire amount of the withdrawal.   This is correct if you withdrew 2022 excess contributions in 2022, but it is not correct if you withdrew 2021 contributions in 2022.  Turbotax will include the earnings as taxable income on your 2022 return.  However, if this was a return of 2021 excess contributions that was processed in 2022, you should have already paid tax on the earnings on your 2021 return, and you would need to get a corrected 1099-R from the broker.  If this is a return of 2021 excess that was processed in 2022, it should be code JP.

@dmertz  do you concur?

[sridharm]

Thank you so much will follow up with Vanguard.

Regards,

Sri

[sridharm]

Hi Opus17 or DanaB27,

Good Morning. While preparing for filing 2022 return got confused with couple hope you will help

to navigate things in right direction. Firstly a little summary to set flow of things right.

I never used to record my Roth IRA contribution in turbo tax  earlier, however in year 2021 we realized made

excess Roth IRA contributions (happened for not paying attention to MAGI) for Year 2019/2020/2021. Based

on your help with inputs we did the following:

1. Amended 2019 tax return to to calculate the excess and had a form 5329 with a 6% penalty.Subsequently paid 6% penalty and dues as communicated by IRS.

2. Subsequently amended 2020 tax return to include the prior excess contribution (from 2019) and the current (2020) excess contribution. Paid 6% penalty
with amended tax retun and subsequently paid minor dues as requested by IRS for interest and late fee etc.

3. Withdrwan excess contribution (with earnings) for Year 2021 for myself and spouse roth IRA accounts before 18th April. In the tax return for Year 2021
reported excess contribution of year 2019 and Year 2020 and paid 6% penalty along with return. To avoid consudion here I didn't reported any excess
contribution for Year 2021 as we were able to withdraw before filing.

4. IRS after a long time approved 2019 and 2020 tax ammendments. Subsequently removed excess contribution for year 2019 and year 2020 from our ROTH IRA
accounts.

5. Now while preparing for 2022 tax return my confusion started as on how to handle 1099-R received from TDM and Vanguard. Do we have to ammend tax return
for year 2021 prior to filing 2022 or I can just proceed with filing 2022 return.

On 1099-R for TDA on first page it has box-1 Gross Distribution and in box 7 code J and in subsequent page box-1 Gross Distribution and box 2a Taxable
amount, box 4 Federal Income tax with held and in box 7 : code J,P.

on 1099-R for Vanguard on first page it has box-1 Gross Distribution and box 2a Taxable amount and in box 7 : code 8,J and on subsequent page
it has it has box-1 Gross Distribution and box 2a Taxable amount and in box 7 : code J,P.

When In imported into turbotax overall I see four entries two for TD and two for Vanguard.

Could you please guide me on how to go about it.

Thank you for your support.

Regards,

Sri

[John A3]

Roth contributions are not deductible on your income tax AND they are therefore not reported.

[sridharm]

Hi Opus17 or DanaB27,

Good Morning. Grateful if one you could look into my issues and provide your valuable inputs.

Thank you

Sri

[DanaB27]

It seems you received 4 2022 Form 1099-R. The Forms 1099-R with codes J and P belong on your 2021 tax return (as Opus17 mentioned). Therefore, if you didn’t enter Forms 1099-R with codes J and P on your 2021 return then you will need to amend your 2021 tax return to enter them.

The 2022 Form 1099-R with codes 8 and J indicates (as Opus17 explained) that you removed a contribution for 2022 in 2022. If this is the case then this will be entered on your 2022 tax return. Only the earnings will be taxable and subject to the 10% early withdrawal penalty (if you are under 59 1/2). Please double-check if this Form is correct. If it was the regular distribution for the 2020 and 2019 excess then it should only have code J, not 8 and J, and will need to be corrected.

The 2022 Form 1099-R with code J is for the regular distribution of the 2019 and 2020 excess and will be reported on your 2022 tax return. Please make sure you include the 2019 and 2020 excess in the net contributions when TurboTax asks:

1. Login to your TurboTax Account
2. Click on "Search" on the top and type “1099-R” 
3. Click on “Jump to 1099-R” and enter all your 1099-Rs
4. Click "Continue" on the "Review your 1099-R info" screen
5. Answer all the questions and make sure you enter the net contributions prior to 2022 on the "Enter Prior Year Roth IRA Contributions" screen
6. Answer the remaining question.

@sridharm 

[sridharm]

Thank you so much for your response. I have a follow up question.

1. When we amend 2021 tax return (previously we haven't included any Roth IRA excess contribution for year 2021 ) do we need to first input Roth IRA contributions for 2021 so the turbo tax generated 5329 first and then enter 1099-R which subsequently might nullify 5329. If yes please guide with the steps.

2. Just in case after inputting 1099-R due to earnings (even though we removed little excess) MAGI is increased and it still shows small amount of excess for year 2021 what option we have can we just pay 6% penalty and  in 2022 return move the minor excess from 2021 to 2022 as we haven't contributed very minimum for 2022. Could you guide us on the steps to take.

If I am bale to explain properly please let me know I will do my best.

Thank you for your support.

Regards,

Sri

2022 

[DanaB27]

1. Generally, you do not need to enter the Roth excess contribution on your 2021 return during the IRA interview if you removed it before the due date  (if you entered it you would need to enter that you removed it on the penalty screen and TurboTax won't fill out Form 5329 part IV).  Please add the 2022 Form 1099-R with codes J and P to report the earnings (TurboTax will fill out part I of Form 5329).

2. In this case, it will be best to enter your total Roth contribution for 2021 on your 2021 tax return IRA contribution interview, then enter on the penalty screen the amount of contribution withdrawn by the due date (ignore the earnings for this entry). If you had an excess contribution because of the increased MAGI TurboTax will calculate the 6% penalty on Form 5329 part IV (in addition to the penalty for the 2020 and 2019 excess).

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Enter your Roth contributions for 2021
5. On the "Do you have any Excess Roth Contributions" answer "Yes"
6. On the "Enter Excess Contributions" screen enter the total excess contribution from 2020 and 2019
7. Continue until the Penalty screen and enter the 2021 excess contribution amount removed by the due date (ignore earnings or losses for this entry).

Yes, if you are able to make Roth IRA contributions for 2022 then you can apply the 2021 excess to 2022 to absorb the excess. Please follow these steps on your 2022 tax return:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Enter your Roth contributions for 2022
5. On the "Do you have any Excess Roth Contributions" answer "Yes"
6. On the "Enter Excess Contributions" screen enter the total excess contribution from 2021, 2020, and 2019.
7. On the "How Much Excess to 2022?" screen enter how much of the 2021 excess you want to apply to 2022.

@sridharm