Excess Roth IRA Contributions

[azdbacker2]

I didn't know that an in plan roth rollover conversion didn't get backed out of MAGI (like IRA conversions do) and we had contributed to Roth IRAs through 2023, but those are now excess contributions.  I didn't catch it before filing electronically with TurboTax.  I have withdrawn the excess contributions plus interest and moved them to a taxable brokerage account.

What do I need to do to file an amended return?  The amended return will be filed before the filing deadline.  Will the excess contribution penalty be refunded?  (I owed taxes and paid the amount that included the penalty.).

Thanks!

[ThomasM125]

You will see an option to amend your return on your home page when you log into TurboTax. Look at the bottom of the page, under Your Tax Return and Documents. Click on the year you want to amend and choose the Amend (Change) option.

To enter a refund of excess IRA contributions in the current year follow these steps:

1. Go to the personal income section of TurboTax 
2. Find the Retirement Plans and Social Security menu option
3. Start or Update IRA, 401(k), Pension Plan Withdrawals (1099-R)
4. Choose Add Another 1099-R
5. Choose I'll type it in myself
6. On the screen that says Tell Us Which 1099-R You Have choose I need to prepare a Substitute 1099-R
7. Enter the distribution amount in box 1 of the substitute 1099-R
8. Enter the earnings in box 2(a)
9. Enter code "P" in box 7 *add code "J" if from ROTH IRA
10. Enter your tax withheld in box 4, assuming it was paid in for 2023 taxes
11. When asked about the year on the form 1099-R, say it is for the year following the year you are working on

You won't be penalized if you withdraw the excess contribution by the due date of your tax return.

[azdbacker2]

I'm back with another challenge.  Looking at instructions for Form 5329 and 8606, I read the instructions for excess Roth contributions that are identified as contributed in the tax year and withdrawn before the filing deadline as only needing to have them withdrawn (including interest) and then file a return removing the contribution (as though it never occurred).  That resulted in TurboTax showing a $900 refund (refunding the excess contribution penalty that I paid with the original return filing through TurboTax).  It showed the same amount in both the dashboard and when I checked the bottom of the first page of the 1040X.

My surprise occurred when after filing the amended return, TurboTax printed a payment form for the difference between the payment I had made with my original filing and the $900 as still being owed.  Checking the Amount You Owe section on the 1040 SR that followed that form (Line 38), the same amount owed is there.  Looking above at the Payment Section of the 1040-SR, it does not include the payment that went in with the original return as having been paid.

Any suggestions are appreciated.  The refund on the 1040X has not been received.

Thanks!

[DanaB27]

To clarify, what amount do you see on line 21 of Form 1040-X that was sent to the IRS? And you had an amount due with your original return and paid this already?

Please see Where's My Amended Return? for additional information.

To confirm, you remove the Roth IRA contribution from the IRA contribution section and enter a 2024 Form 1099-R to report the earnings on your 2023 return with these steps:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2023?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter J and P
9. Click "Continue"
10. On "Is the IRA/SEP/SIMPLE box on this 1099-R checked?" screen answer "No, the box is blank"?
11. On the "Which year on Form 1099-R" screen say that this is a 2024 Form 1099-R.
12. Click "Continue" after all 1099-R are entered and answer all the questions.
13. 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".

[azdbacker2]

Thank you for such a timely response.

Line 21 of the 1040-X indicate $900.  (The same amount is in Line 22.)

I removed the 2023 Roth IRA contribution from the IRA contribution section.  I did not entered a 2024 Form 1099-R as the IRA recordkeeper said that they would provide that form in 2025 for the 2024 return (the returned interest was paid out in 2024).

If it makes a difference, the excess contributions that were removed in February 2024 were transferred by the recordkeeper to a taxable brokerage account, withholding some federal tax.  The confirmation letter from the recordkeeper indicated the total amount returned, separating original contributions and interest.

Thanks! 

[DanaB27]

If you had paid the amount due with your original return then you will get the amount shown on line 22 of Form 1040-X. You can ignore the payment form.

Yes, you can wait until you get the 2024 Form 1099-R for the withdrawal of excess contributions and then amend the 2023 return again if necessary.

Generally, financial institutions will use this rule:

• If you made the excess Roth IRA contribution in 2024 for 2023 and then withdrew it in 2024 then you will have code 8 and J on your 2024 Form 1099-R, and it will have to be reported on your 2024 tax return.
• If you made the excess Roth IRA contribution in 2023 for 2023 and then withdrew it in 2024 then you will have code P and J on your 2024 Form 1099-R, and it will have to be reported on your 2023 tax return.

@azdbacker2 

[azdbacker2]

Thank you for the additional information!