Excess Contribution Treatment

[Anonymous]

Need help, as I think we made a mistake on handling an excess contribution to a regular IRA for 2019.

Made a contribution of $3,600 on December 31, 2019. Determined this was more than could be contributed by $978. Prior to the filing deadline, requested a distribution of the excess amount, and received $803.38 in return (assume the difference is because of a decline in value). 

On the 2019 1040, reported contributions of $2,622 (3,600-978) on line 19 of Schedule 1.

I suspect this was the wrong thing to do.

The $803.38 returned as excess was contributed back into the IRA as a 2020 contribution.

Form 5329, line 9, requests excess contributions from 5329 from 2019 -- which we don't have. We entered the 803.38 anyway, and TurboTax flags it as an error.

I suspect we'll need to amend 2019...but I'm not sure how.

Can anyone clarify?

[DanaB27 · Accepted solution]

You do not have an excess contribution in 2019 because you withdrew the excess contribution (and you had no earnings to withdraw) before the due date of your 2019 tax return.

It seems you entered the contribution and the withdraw of the excess correctly on your 2019 tax return. You did not have any earnings on the excess contribution therefore there was no income to report.

Please do not enter any excess contribution from prior years on your 2020 tax return (on Form 5329) since you removed them before the due date of your 2019 tax return. Only enter the $803.38 as a regular contribution for 2020.

1. Open your return 
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"