How do I report the Return of Excess contribution in TurboTax 2023 downloaded version?

[user_007]

How do I report the return of excess contribution in TurboTax 2023 downloaded version?

In 2023, I contributed $2000 to a Roth IRA and invested it. Three months later, I realized I wasn't eligible to contribute to a Roth IRA due to exceeding the income limit. I contacted my brokerage to request a return of excess contribution. However, due to market fluctuations, the returned amount was $1922 instead of the original $2000. At the end of 2023, I received 1099R and 5498 forms from my brokerage. How should I report this return of excess on my taxes?

As an additional note, I also contributed the full $6500 to a Traditional IRA and immediately converted it to a Roth IRA. Consequently, I have another set of 1099R and 5498 forms. Since the return of excess and the backdoor Roth conversion are independent events, I assume I can report them separately to the IRS. Please let me know if my understanding is incorrect.

[DanaB27]

You will not enter the Roth IRA contribution in the IRA contributions  section since you withdrew the excess contribution before the due date. 

To enter the nondeductible contribution to the traditional IRA:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
10. Enter your basis in the Traditional IRA from your 2022 Form 8606 line 14 (if you had a basis in the prior year)
11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter the 1099-Rs for the return of excess contribution and the  conversion: 

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" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the Form 1099-R for the returned Roth IRA contribution
8. On the "Your 1099-R Entries" screen click "Add Another 1099-R" and enter the Form 1099-R for the conversion
9. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
10. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
11. On the "Your 1099-R Entries" screen click "continue"
12. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
13. Answer the questions about the basis from line 14 of your 2022 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[user_007]

I am slightly confused with the response, in the first part you mentioned "You will not enter the Roth IRA contribution since you withdrew the excess contribution before the due date. " and in the second part "To enter the 1099-Rs for the return of excess contribution and the conversion:". Return of excess and backdoor Roth conversion are two separate events. I reported backdoor Roth conversion using https://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html. Now, I am left with a 1099-R from the return of excess. How do I report that in TurboTax? 

[DanaB27]

You will not enter the Roth IRA in the IRA contribution section since you withdrew it with earnings before the due date it is like you never made the contribution. Another option is to enter the Roth IRA in the IRA contribution section but then enter the excess contribution amount as withdrawn on the penalty screen. 

You will need to enter the Form 1099-R for the excess contribution as mentioned in the above instructions. Both Form 1099-Rs (for excess and for the conversion) are entered in the same section of TurboTax. Since you withdrew the excess contribution for 2023 in 2023 your 2023 Form 1099-R should have code 8 and J.

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" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. On the "Your 1099-R Entries" screen click "Add Another 1099-R" and enter the Form 1099-R for the returned  excess Roth IRA contribution.