Need help to process an excess 2020 Roth IRA contribution

[tomwald]

I am attempting to process an excess Roth IRA contribution, but I am finding the process challenging and convoluted. It also seems there are errors in TurboTax, so may be entering something incorrectly.

I received a Form 1099-R from my Roth IRA holder. It has Box 7 given as "J". I followed a process that both the IRS and my Roth IRA holder state will result in no penalties to me.
When I go through the process, TurboTax asks me to enter Prior Year Roth IRA Contributions. It doesn't state whether this includes interest income on the account. It doesn't specify how this should be calculated. I'll add that there is no practical way that I can go back for each of the past 21 tax years to add this up. If I'm expected to look this up with my Roth IRA holder, it's not clear what date I should look to, e.g. should I attempt to find the balance as of 1/1/20 or 12/31/20 or?

I'll also note that my tax refund goes down by $80 for a $310 excess contribution, when there is no clear reason that it should go down at all. The amount of my 2020 Roth IRA contributions shouldn't affect my taxable income for 2020, and I should not be receiving any penalty for the excess contribution, which I returned in 2020 (and the IRS says that I should not be penalized). So why does my tax refund go down when I process an excess Roth IRA contribution.

[DanaB27]

Prior year Roth contribution are all your contributions you made to your Roth IRA minus any previous withdrawals (do not include any interest or earnings). Unfortunately, if you did not track this previously the you will have to go through your records to come up with the correct contribution amount.

When you requested the withdrawal with you bank did you request to withdraw the excess contribution and earnings? I yes, then your 1099-R should have the total distribution in box 1 and the earnings in 2a with codes J and 8 in box 7.  

When you are in the IRA contribution section, on the penalty screen you can enter how much of the excess contribution you withdrew by the due date. Then TurboTax will not calculate the penalty. 

Please keep in mind the earnings will be included in your taxable income and if you are under 59 1/2, then you will also pay the 10% early withdrawal penalty on this amount.

[tomwald · Accepted solution]

I think I've resolved this.
* The TurboTax interface and series of questions for this is confusing. 

* I made an estimate for prior year contributions. As long as this is anywhere close to the actual amount, then the taxes seem to be calculated properly. However, leaving it blank, $0, or too low seem to have caused taxes to be charged.

* I didn't owe any taxes on the amount, since it had already been taxed, and since the distribution was a valid early distribution based on excess contributions distributed after the deadline but within the same year.