Excess IRA contribution in 2022

[lmcle5361]

Maximum contribution to my Roth made in 2022.  Then contributed $2,000 to IRA thinking the limits were separate for the Roth and IRA.  The excess contribution was made in June 2022 and returned by the broker in December 2022.  1099 received shows the $2000 as taxable but it has not been used to reduce income.  Is the excess contribution taxable?

Lee M

[ThomasM125]

The excess contribution is not taxable since you withdrew it by the due date of the tax return. Any income on the funds would be taxable, and that amount should have been reported on line 2(a) of your Form 1099-R. You should have a code 8 in box 7, then the distribution amount in box 1 would not show as taxable on your Form 1040, on line 4(b).

You can view your form 1040 and schedules 1 to 3 while working in the online version of TurboTax by following these steps:

1. Click on Tax Tools in the left menu bar
2. Click on Tools
3. Look under Other Helpful links….
4. Choose View Tax Summary
5. Look in the left menu bar and choose Preview my 1040
6. Scroll down the page to see form 1040 and schedules 1 to 3

[lmcle5361]

You are in agreement with my thoughts.  The complicating factor is that the broker shows the line 1 amount as fully taxable on line 2 and refuses to correct it.   The solution is a complete explanation in the comments to the return.  I suspect this will increase the potential of audit.

Thanks for your comments.  They are most helpful.

Lee M

[DanaB27]

If you requested the withdrawal of the traditional excess contribution plus earnings then they should have issued a 2022 Form 1099-R with codes 8 and 1 with the distribution amount in box 1 and earnings in box 2a. But if you just made a withdrawal then they probably issued a 2022 Form 1099-R for a regular distribution. 

"You won’t have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw any interest or other income earned on the excess contribution. You must complete your withdrawal by the date your tax return for that year is due, including extensions." (IRS)

[lmcle5361]

Thanks to ThomasM125.  Your answer confirms what I had determined to be the correct application of the law.  

LeeM

[lmcle5361]

The payer on this returned amount has listed the distribution as all taxable although $2,000 is not taxable.  Should a form 4852 be filed with the return?  The payer has refused to submit a corrected 1099R.

LeeM

[DanaB27]

Yes, you might want to file Form 4852 if you requested the withdrawal of excess contribution plus earnings and the payer issued the wrong Form 1099-R and refuses to correct it. Box 1 should show the distribution amount (contribution plus earnings or contribution minus loss) and box 2a will show the earnings (or $0 if there was a loss).