[Help] Very confused with 1099-R how to report Roth IRA with excessive contribution and net negative contribution

[loai5470]

Hi Community tax experts

I need advice as I am very confused about how to file IRA properly. I have made several mistakes over the past three years and am still paying the penalty. 

In 2019, I contributed

$3000 to Traditional IRA  

$3000 to Roth IRA 

In 2020, I converted $3004 from Traditional Roth to Roth ( forgot to report) 

in 2020, I contributed $60000 to Roth IRA 

In 2021, I was told by IRS that I have excess contributions in both 2019 and 2020 and I need to get them out so I withdrew 

$3290 from Roth for 2019 excess contribution 

$3590 from Roth for 2020 excess contribution 

Because I invested the money in the stocks and I only had $23

in 2022 December 31st. Roth value only has $2372 left instead of $5120 ($12000 - $3290- $3590)

So I have no idea how to enter them into the IRA 

One section is what's the 2020 taxable conversation I need to report net conversions to your Roth IRAs that were taxable and nontaxable in 2020. also enter withdrawals from this amount if any

Since I converted $3004 from traditional, Do I put $3004 or do I put $4 ( $3004 - $3000 that I originally put in)

What about Nontaxable conversions less withdraws? If I read it as is, it would be either $3004 - $3290 = Negative ($286). Can I put a negative number in there? 

OR 3000-3290 = -290 since $4 is a gain? if so where do I put that $4? 

It's a loaded question and I am just very confused. Please advise how I could proceed. 

Thanks 

[DanaB27]

You will need to amend your 2020 return to report the conversion. If you didn't have any basis (nondeductible contributions) then it will be fully taxable. If you had a basis then your nontaxable portion of the conversion will be calculated on Form 8606.

To confirm, you removed the 2019 and 2020 excess contributions in 2022 as a regular distribution (without any earnings) reported on the 2022 Form 1099-R  with code J in box 7?

On your 2022 tax return, your net contributions prior to 2022 will include the 2019 and 2020 excess contributions (since there weren't withdrawn until 2022). For the conversion, you will enter the $3,004 (assuming you didn't make any withdrawals more than your net contributions in the previous year).

Please see Ordering Rules for Roth Distributions for additional information.

[ChiMing]

@DanaB27 

Thank you so much for helping 

To confirm, you removed the 2019 and 2020 excess contributions in 2022 as a regular distribution (without any earnings) reported on the 2022 Form 1099-R  with code J in box 7?

- $3290 I have a J

- $3590 I have a P & J in box 7 

hmm. I need to amend 2020? I think I have tried to Amend my 2020 already via Turbo Tax, but how do I find it went through or not? The only thing that's taxable should've been $4 instead of $3004. 

[DanaB27]

Are these 2022 Form 1099-R or 2021 Form 1099-R?

A 2022 Form 1099-R with code J will belong on your 2022 tax return and a 2022 Form 1099-R with codes P and J belongs on your 2021 tax return.

Yes, if you made nondeductible traditional IRA contributions then only the earnings will be taxable on your 2020 tax return when you report the conversion. You only need to amend your 2020 tax return if you didn't report the conversion (Form 1099-R) on it. When did you file the 2020 amended return? Did you mail the return? Please see Where's My Amended Return?

@ChiMing  

[ChiMing]

@DanaB27 

Hi Dana, 

Okay. I had to call Fidelity to triple check what's going on. So please let me rephrase 

2019: $3000 to Traditional 

2020

1. Converted $3004 to Roth from Traditional 

2. Contributed $6000 to Roth  (

December 28th, 2020 )

Jan 25, 2021

Contributed $6000 to Roth 

I mailed 2020 Amed for the $3004 in May 2021, but I never heard back from IRS. 

2022 

January. I got notified by IRS that I had to file a return of excess for both 2020 and 2021 or I would get penalized 

so I took out $3290 for 2020 (J)  and $3591 for 2021 (PJ)

$3290 is penalized for 6% as I didn't get the money out fast enough 

So now, I am still very confused how I should input in the TurboTax 1099-R section 

I have contributed total of $3004+6000+6000 = $15004, so I should put $15004 for the Roth IRA contirbution prior to 2022, correct? 

Then I converted $3004 from Traditional to Roth IRA, 

2020 Taxable conversation should be $4

2020 Non Taxable conversation less withdraws would be $3000

is that right? 

My total excess contributions are $6881($3290+$3591)

[DanaB27]

You should be able to check the status of your amended return here: Where's My Amended Return?

No, you will enter $6,000 for net contributions prior to 2022 (assuming you didn’t make any other direct Roth IRA contributions). The contribution for 2021 does not count because you removed it before the extended due date.

Yes, under conversion you will enter:

• 2020 Taxable conversation  $4
• 2020 Non Taxable conversation less withdraws $3,000

Yes, you will have to pay the 6% penalty for the 2020 excess on your 2020 and 2021 returns. The 2020 excess will be removed from your 2022 tax return when you enter Form 1099-R with code J.

The 2022 Form 1099-R code PJ will be entered on your 2021 tax return. If you didn't do this when you filed your 2021 tax return then you will need to amend your 2021 tax return. Only the earnings listed in box 2a will be taxable and subject to the 10% early withdrawal penalty if you are under 59 1/2.

On the 2021 return, you will also enter the excess  2021 contribution amount as removed by the due date on the penalty screen. TurboTax will only calculate the 6% penalty on the 2020 excess contribution.

1. Click "Deductions & Credits" (under Federal) on the left
2. Scroll down and click "Show more" next to "Retirement and Investments"
3. Scroll down and click "Start/Edit" next to "Traditional and Roth IRA Contributions"
4. Select “Roth IRA”
5. Enter the Roth IRA contribution for 2021
6. On the "Do you have any Excess Roth Contributions" answer "Yes"
7. On the "Enter Excess Contributions" screen enter the total excess contribution from 2020.
8. Continue until the penalty screen and enter the excess 2021 contribution amount withdrawn (ignore earnings and losses here).

@ChiMing  

[ChiMing]

@DanaB27 

got it

I have checked the status that

2020 is amended. 

So that means, I also need to amend 2021 as well. I will do that as well

What I do not understand is that on turbotax

line 24 shows $3591 as excess contribution (where has PJ) - > I thought since I withdraw it before the deadline, this should only count as return of excess. so no penalty should occur? 

in line 25, now there is a 6% penalty ($3591)

I don't understand why 

[DanaB27]

You should only have the 2020 excess shown on your 2022 tax return Form 5329 lines 18. Do not enter the 2021 excess when TurboTax asks about prior excess contributions since you removed it by the due date. When you file your 2021 amended return verify that you entered the 2021 excess contribution as removed on the penalty screen (see my instructions in my previous post).

To verify the prior year's excess contributions on your 2022 tax return:

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start/Edit" next to "IRA, 401(k), Pension Plan (1099-R)"
4.  Click "Continue" on the "Review your 1099-R info" screen
5. Answer all the questions and make sure you enter the net contributions prior to 2022 on the "Enter Prior Year Roth IRA Contributions" screen
6. On the "Do you have any Excess Roth Contributions" answer "Yes"
7. On the "Enter Excess Contributions" screen enter the total excess contribution from 2020 (make sure the 2021 excess amount is not included here).

@ChiMing  

[ChiMing]

@DanaB27 

I appreciate your help with the 2022 Tax. I've filed it and hopefully, I got it correctly 

I am a little bit confused about what to enter in Year 2021 1099. When I entered 

$3590 (PJ), I got penalized $577 - not sure where this is coming from 

$3290 (J), I got penalized $163 ( 6% of $6000-$3290) 

When I entered both, then the penalty is gone - something is not right 

So do you mean enter J in 2021 not PJ? 

So I entered 

1. $3591 with Code PJ

2. Enter Prior year Roth IRA Contribution - I think I should enter $6000. -> The penalty changed to $360

3. Enter Excess Contribution $3290 (Code J) as this was for 

4. Contributions withdrawn before the Due Date (Enter any contribution that you withdrew before April 18, 2022.  -> I think I withdrew both $3290+3591 in October. ...  So I enter 0 here? 

if I do that the penalty becomes $360. 

SO I am very very confused how many penalties I should pay and how to enter it properly. 

Should I be entering both 2020 and 2021 Roth IRA contributions in 2021's amendment? 

[DanaB27]

 The 2022 Form 1099-R with code J will be entered on your 2022 return.

The 2021 Form 1099-R with code PJ will be entered on your 2021 return. It seems that the earnings in box 2 created a new 2021 excess contribution because the earnings increased your MAGI. Usually, it is recommended to withdraw some extra to avoid that. You will have to pay the 6% penalty on this new excess on your 2021 and 2022 returns. You will remove this new excess as a regular distribution, and it will be removed next year on your 2023 tax return when you enter the 2023 Form 1099-R with code J (you will get this in 2024).

1. Yes, you will enter the 2022 Form 1099-R Code PJ
2. Yes, you will enter the Roth contribution for 2021($6,000)
3. Yes, your excess contribution from prior years will be $3,290.
4. You had until the extended due date of Oct 17th, 2022 to withdraw the 2021 excess and it seems you did withdraw it in time since you go Form 1099-R with code PJ. You will enter the 2021 excess contribution amount as removed (ignore the earnings and losses here, this should be box 1 minus box 2a on Form 1099-R code PJ).

@ChiMing  

[ChiMing]

@DanaB27 

Thanks for your help 

So I am still confused about this section 

1. You had until the extended due date of Oct 17th, 2022 to withdraw the 2021 excess and it seems you did withdraw it in the time since you go Form 1099-R with code PJ. You will enter the 2021 excess contribution amount as removed (ignore the earnings and losses here, this should be box 1 minus box 2a on Form 1099-R code PJ).

I have withdrawn a total of $6881 ($3290 (J) + $3590 (PJ) before October.  so based on what you said. I should enter $3590 (PJ) in the contributions withdrawn before the due date instead of the total amount ($6881) that withdrew, correct? 

This is very confusing. apologies to keep asking questions. 

Additionally, Turbotax is now telling me that I am not qualified to contribute any Roth since now the combined income is over the limit. 

When I was withdrew $3590 was based on my MAGI when I was single and Fidelity told me this is what I need to withdrew instead of the full $6000 ( I don't have $6000 in roth since I lost a lot de to the stock dip)

Does that mean, I need to redo my 2022 tax as well and withdrew the full remaining amount ( $6000-3590)? and refile again? 

[DanaB27]

Yes, you will enter the excess contribution amount of $3,590 (excess amount for 2021) as withdrawn on the penalty screen during the IRA contribution interview.

Yes, if now because of the taxable earnings your MAGI is over the limit to make any Roth IRA contribution then you will have to request a regular distribution of the amount. If you have less than the excess amount in the Roth IRA account then withdraw the rest and the penalty will stop when the Roth IRA is $0.

Yes, you will have to add the new excess in your 2022 return. You will enter line 24 of the 2021 Form 5329  as the excess from prior years in the 2022 tax return:

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start/Edit" next to "IRA, 401(k), Pension Plan (1099-R)"
4.  Click "Continue" on the "Review your 1099-R info" screen
5. Answer all the questions and make sure you enter the net contributions prior to 2022 on the "Enter Prior Year Roth IRA Contributions" screen
6. On the "Do you have any Excess Roth Contributions" answer "Yes"
7. On the "Enter Excess Contributions" screen enter line 24 of the 2021 Form 5329.

The amount that will show on your 2022 Form 5329 line 24 will be the excess that has to be removed in 2023 (unless your value is less, then just remove the amount left in the Roth IRA).

@ChiMing  

[ChiMing]

@DanaB27 

Thanks I will have to review how much is left in my Roth and I don't think I will have enough to withdraw to meet the remaining amount as stock dipped ( I had total of $15,004 ( $3004+6000+6000), but stock market dipped and I lost around $6k, so after withdrawing $6881, I had only $2100 left and that's not enough to cover the $2300 that I should be withdrawing ( $6000-$3591)

[ChiMing]

@DanaB27 

I also have question 

how do I report the loss on tax filing? 

Although I should've taken out the full $6000 in 2020 and 2021, 

However due to the stock tanking, I had net loss and that's why I could only take out 

$3290 and $3590. 

However when I report like this, The Tax filing only reflects the amount I withdrew. so I am not sure how I could reflect that as 1099-R didn't show the net loss at all. Where can I reflect that loss in Turbo tax?

[ChiMing]

What Should I do with tell us the value of your Roth IRA in 2022 Tax?

1. Should I put zero as I have a net loss of  $2409.01

What about 2021? Should I put net loss of $2710?