Excess Contribution to Traditional IRA Made and Withdrawn in 2023 Due to No Earned Income

[Angela59]

In the first quarter of 2023, I contributed $1620 to my traditional IRA.  In March 2023, I realized that I was not eligible to contribute to my IRA because I have no earned income, so I withdrew the contribution in March before the tax deadline.  I am over 59 ½ years old.  In 2024, I received a 2023 1099-R for the excess contribution.  It has information in the following boxes:  Box 1 Gross distribution: $1676.41; Box 2a Taxable Amount $56.41; Box 4 Federal Income Tax Withheld $368.81; Box 7 Distribution Code 8, IRA/SEP/SIMPLE box is checked; Box 14 State Tax Withheld $368.81.  I entered my 1099-R into TurboTax for my 2023 return in the Federal Taxes, Income Section, Retirement Distributions Section.  I am now in the Federal Taxes, Deductions and Credits, Retirement and Investments Section.  It is asking me if I contributed to a traditional IRA for 2023.  Since I made and withdrew the entire contribution in 2023, do I answer “No” here?  If I am to answer “Yes”, what are the next steps?  Also, if a Form 5329 for a 10% early withdrawal penalty is generated, what are the steps to correct that, since I am over 59 ½?  I am using the desktop version of TurboTax Premier.

[DanaB27]

You can answer "No" to the question if you contributed to a traditional IRA for 2023 since you withdrew the contribution.

Please follow these steps to get the exception for the 10% early withdrawal penalty:

1. Click on the "Search" on the top right and type “1099-R” 
2. Click on “Jump to 1099-R”
3. Click "Continue" after all 1099-R are entered and answer all the questions.
4. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".