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Level 2
posted Feb 18, 2022 11:48:56 AM

Excess IRA contribution with a loss

I contributed to my traditional IRA in 2021 and was not eligible. I pulled it back out this year. My initial investment was $7000. It turns out I have a loss after selling it and the distribution after pulling it back out was about 6700. How do I fix this on my 2021 tax return? Is gross distribution $6,700? What about box 2a? Would it be a negative number or zero? Do I use code 8 alone or do I need to use code J also? 

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3 Replies
Expert Alumni
Feb 18, 2022 1:02:56 PM

No, just report it as $7000 in both Box 1 and lave 2A blank. Use code 8-return of contribution taxable in 2021 and it won't be reported as a taxable distribution.

Level 2
Feb 18, 2022 2:12:02 PM

Thank you for your help. Do I need to create a substitute 1099-R to send in because I will not get one until next year due to pulling the money out this year? Or should I just fill out the info as though I had one?

Expert Alumni
Feb 18, 2022 2:34:34 PM

Yes, you can prepare a substitute 1099R to report return of contribution.  

  1. In federal>wages and income>Retirement Plans and Social Security>IRA, 401(k), Pension Plan Withdrawals (1099-R)
  2. click on 1099-R to start/edit/update.
  3. The program says Tell Us Which 1099-R You Have
  4. List of forms shows 1099-R, CSA, RRB and asks who does the form belong to - if married.
  5. Select 1099-R and stay on page
  6. Below that, is a box that says I need to prepare a substitute 1099-R.
  7. Check the box, then continue
  8. Fill out as a much information as you can so you may efile the return. Particularly, make sure you have the right EIN for your company as well as name and address. Be sure to code this as a code 8 and then enter the amounts that i have outlined in my previous answer.