Made max ROTH contribution plus 'catch-up' of $8000 in Jan 2024 in anticipation of having necessary earned income. Circumstances changed, no earned in come in 2024. Turned 59 1/2 on Oct 25, 2024. On Oct 28, 2024 I performed a 'Removal of Excess 2024 Contributions' plus earnings (calculated by Betterment) of $9,127.49. TurboTax Home & Business 2024 electronically imported the 1099-R (which I though would make things simple) -- but I am being taxed on the entire $9,127.49.
I have researched this here & elsewhere and cannot figure out how to fix this. I noticed that Betterment's 1099-R lists the entire $9,127.49 in box 2a 'Taxable Amount', but also check the 2b box 'Taxable Amount Not Determined' (seems contradictory to me).
I can override the 2a box on the 1099-R and put the correct taxable amount of $1,127.49 there -- then TurboTax recalculates the tax owed correctly.....HOWEVER, I am hesitant to submit a 1099-R that differs from what Betterment will send to the IRS.
Any help would be appreciated.
Your 2024 Form 1099-R for the return of excess contribution plus earnings should have code 8 and J with the distribution amount shown in box 1 and only the earnings in box 2a. It seems that Betterment sent you an incorrect Form 1099-R. Please contact Batterman to correct Form 1099-R.
"For the distribution of excess Roth IRA contributions, report the gross distribution in box 1 and only the earnings in box 2a. Enter Code J and Code 8 or P in box 7" (1099-R Instructions).
If they refused to correct the Form 1099-R then you could file a substitute Form 1099-R and TurboTax would add Form 4852. Please note, returns including Form 4852 can't be e-filed because of IRS regulations.