Entering Excess Roth Contribution Return for 2021

[srgould41]

Hi all,

I have not yet filed my return for tax year 2021. Trying to figure out how to manually create a 1099-R for 2021 since I won't receive it until next year.  I made full contributions to my Roth last year (7,000 and most of it in early December), however in late December decided to convert funds in my traditional 401k to a Roth 401k. This put my earnings over the limit for the Roth which I found out a week ago. My broker refunded the contributions and earnings ($30.01). Besides the dismal return, I am trying to figure out how to claim this in my return. I am 60 so am eligible to take distributions.

Other posts show how to do it for previous years, but it seems odd to me and the codes might not be correct for 2021. 

In box 1 I added the gross distribution of $7,030.01

In box 2a I added the taxable amount of $30.01

I am trying to determine which codes to use in Box 7. It looks to me like I should use code "8 - Return of contribution taxable in 2021".

Does this look right right? Anything else for the second entry?

Thanks!

[DanaB27]

No, you will use the code P and J. Ignore what it says in the dropdown for code P, there will be a follow-up question about which year is on the 1099-R. You will select 2022 and then TurboTax will treat it correctly.

To create a 1099-R in your 2021 return to report the withdrawal of excess contribution plus earnings please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2021?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning) of $7,030.01
7. Box 2a enter the earnings of $30.01
8. Box 7 enter P and J 
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.

You will get a 1099-R 2022 in 2023 with codes P and J for the withdrawal of excess contribution and earnings. Since you are reporting it now on your 2021 return you can ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must 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 P will not do anything in 2022 tax return but the withholding will be applied to 2022.

Please see What happens if I made an excess Roth IRA contribution for additional information.

[srgould41]

Thank you

[srgould41]

It looks like the code J caused the 5329 to show a 10% penalty on the proceeds. Since I am over 59 1/2 that should not be the case. I expected to only have the proceeds added to my income and be taxed as ordinary income.

Are you sure the code J is correct?

[DaveF1006]

It depends. If your holding period for the Roth was  less than five years, you do need to pay the early withdrawal penalty on the earnings regardless of your age. The five year holding period is counted from the time you made your first Roth Contribution to the time the distribution was made.

If you held the Roth more than five years, there is a qualification question in the Turbo Tax interview that addresses this.

[Critter-3]

Wait a minute ... ROTH conversions are NOT included in the AGI for ROTH contributions ... so did you enter the ROTH in the 2021 program and did the program say you had an excess contribution ?   https://finance.zacks.com/tax-impact-roth-conversions-making-new-roth-contributions-7698.html

[srgould41]

Previous question was did I have the Roth for less than 5 years? No I have had it over 10.

TurboTax did tell me that I made too much to contribute to a Roth and needed to withdraw all $7k. MAGI is around $196k (includes a distribution to may the tax on the conversion).

[srgould41]

I have had the Roth for over 10 years. I don't recall a question about how long I have held it, but I may be forgetting it. 

[DanaB27]

Yes, you are correct you should not have to pay the 10% early withdrawal penalty (please see IRS Additional Tax on Early Distributions and Exceptions for details).  

Please follow these steps to get the exceptions from the penalty:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top and type “1099-R”
3. Click on “Jump to 1099-R”  and enter your 1099-R
4. Click "continue" after all 1099-R are entered and answer all the questions.
5. Continue until "Did you use your IRA to pay for any of these expenses?" screen (this screen won't come up if you only withdrew your contributions) and enter the amount under "Another reason".

@srgould41