Need help populating 1099 for removal of excess after tax contribution

[zz181]

Hello:

Some background:

1. I made an excess after-tax contribution of $20647 in Dec 2021.  This amount was rolled-over to a Roth immediately.

2. The excess was removed in July (before the October 15th 2021 deadline) and $16442.20 (minus loss of $4204.80) was returned to me. So did not amend the 2021 return since I removed the exces by October 15th 2021.  

3. I received a 1099-R from the custodian with $16442.20 (there was a loss) in Box 1 and codes PJ in Box 7 and the rest all empty/unchecked. 

My questions:

5. Now I need to generate a 1099-R for the excess conribution as the administrator.  Do I enter P or 8 in Box 7? 

6. Should be entering in Box 1. Is it $20647 or $16442? Also, do I need to check or fill any other boxes on the 1099? 

7. Anything else I need to be doing on my 2022 tax return?

Hope dmertz or Champ stops by to respond....Thanks.

[DanaB27]

5. and 6. Yes, generally your 2022 Form 1099-R with codes P and J will have to be entered on your 2021 tax return as shown on the form if you didn't create the Form 1099-R when you filed the 2021 tax return. But since you had a loss it won't change your return if you amend it. Only earnings from the excess contributions are taxable on your 2021 tax return. Therefore, you don't need to amend your return.

If you were the plan administrator you should have filed a 2021 Form 1099-R for the rollover that happened in 2021. Box 1 would be the amount that was rollover over.

7. No, you don't need to do anything on your 2022 tax return unless your Form 1099-R shows tax withholding then you will need to enter it on your 2022 tax return as well to get the taxes applied to your 2022 tax return. The code P will tell TurboTax to ignore the distribution but it will apply the withheld taxes to your 2022 tax return.

To verify, this excess contribution of $20,647 in Dec 2021 was a direct contribution to the traditional IRA and then you converted it? Or did the amount come originally from another retirement account (rollover)? If it came from another retirement account then it should not have been entered in the IRA contribution section (assuming the rollover happened within 60 days after distribution). 

[Edited 3/8/2023 | 1:57pm PST]

@zz181 

[zz181]

Thank you, DanaB27.

I am confused by this statement - 2022 Form 1099-R with codes P and J will have to be entered on your 2021 tax return as shown on the form if you didn't create the Form 1099-R when you filed the 2021 tax return

I receieved this 2022 1099 form early this year (2023) and did not have this when I filed my 2021 return. So none of this was reflected in my 2021 taxes.  So what do I do now? 

To clarify, this excess contribution was into an After-Tax account. In other words, it was after tax monies (first step of mega backdoor Roth before the money was rolled-over into the Roth). The excess wasn't from a TIRA or anyother retirement account. I was told that I need to create a 1099 as an administrator to notify the IRS about this excess contribution. Is that not correct?

Or can I just leave this out since it is reflected in the 1099-R I received from the custodian for the removal of the rolled over funds from the Roth? 

[DanaB27]

Yes, to report the removal of the excess contribution all you need is the Form 1099-R that you received from the custodian for the removal of excess contribution. A 2022 Form 1099-R code PJ will belong on your 2021 tax return. But since you didn't have any earnings on the removal (box 2a should be $0) you do not need to amend your return. All this would do is add an explanation statement.

To confirm you made the only after-tax contribution to the 401k (work retirement account) and then this was right away rolled over to the Roth IRA in 2021. This rollover should have been reported on a 2021 Form 1099-R and then entered on our 2021 tax return.

 In regards to my statement "2022 Form 1099-R with codes P and J will have to be entered on your 2021 tax return as shown on the form if you didn't create the Form 1099-R when you filed the 2021 tax return", some people create a Form 1099-R with the distribution and earnings information they received from their bank to avoid having to amend the return when they get the actual Form 1099-R.

[Edited 3/8/2023 | 2:00pm PST]

@zz181 

[zz181]

Thanks DanaB27. Appreciate all the help you are providing. 

This excess contribution was into a non-prototype self adminstered account. The monies then was rolled over into a externally held Roth at Fidelity (who issued the 1099-R with the codes PJ).

Does this change anything? 

[DanaB27]

Yes, this isn't reported on your 2022 tax return since it was a contribution for 2021. If you had earnings you would have to report it on your 2021 tax return but since you had a loss you have no taxable income to report on your 2021 tax return. You don't need to amend your 2021 tax return.

Yes, a conversion of after-tax money would be a nontaxable rollover.

[Edited 3/8/2023 | 10:31 am PST]

@zz181

[zz181]

Thank you, DanaB27 for taking the time to respond.  Your responses and clarifications are immensely helpful. 

[zz181]

Sorry DanaB27, one follow up question to your statement: Yes, a conversion of after-tax money would be a nontaxable rollover.

To be clear, I don't have to anything right? In other words, no need to generate a 1099 as an administrator? 

Thank you.

[DanaB27]

To clarify, you generated Form 1099-R for the rollover in December 2021 and reported the rollover on your 2021 return, correct?

@zz181 

[zz181]

The contribution to after-tax and the subsequent rollover to Roth occured in 2021 December.  The removal from Roth occured in July 2022. Received a 1099 from  Fidelity (Code PJ) in Feb 2023 indicating the removal. 

NO, neither the contribution nor the roll over were reported in 2021.  That is what I am trying to determine now. 

Thanks.

[DanaB27]

Yes, a plan administrator has to issue a Form 1099-R for a rollover. And this Form 1099-R will have to be entered on your 2021 tax return. Since you haven't reported it on your 2021 tax return you will have to amend your 2021 tax return. You will enter Form 1099-R for the rollover and Form 1099-R with code PJ. None of this will be taxable.

You won't be able to generate Form 1099-R with TurboTax. Please see the IRS website for the 2021 Form 1099-R and Instructions.

[Edited 3/9/2023 | 6:42 am PST]

@zz181 

[zz181]

Thanks, but this confuses me even more now, DanaB27.

How do I enter this 1099 if I dont have to amend the returns. All this happened after I filed my 2021 taxes and all along, I was told by experts here that I wouldn't have to amend the 2021 taxes. Am I missing something here? 

Is this something I can use Turbotax paid services for? 

[DanaB27]

Yes, now that you have the two Form 1099-Rs to enter on your 2021 tax return it will be best to amend your 2021 tax return. The Form 1099-R with codes PJ and a loss didn't change your tax due therefore it wasn't necessary to amend the return. But with two Form 1099-R, it will be best to report it and therefore amend your return.

We have TurboTax Live services but it seems that "only tax returns filed with Full Service can be amended with Full Service".

[zz181]

Wondering if DanaB27, CHAMP or dmertz can please respond to my question?

Anyone?

Thanks.

[zz181]

Thanks, DanaB27.

I just saw your response.