1099-R with negative earning

[jac310]

Hello, I made a contribution to my Roth IRA in early 2021. I ended up making more in 2021 than I expected due to stock sales at the end of the year which made me ineligible for any contribution to my Roth IRA. I had Fidelity withdraw my excess contribution and earnings in 2022. To do so, I had to liquidate some of the investments at market costs to make sure I had enough cash to withdraw. I'm going to enter form 1099-R on my 2021 taxes but my earnings were negative. What do I put in box 2a for earnings (the negative figure or do I just leave blank)? I contributed $6000 but Fidelity calculated my total contribution and earnings at $5933.80.

[DanaB27 · Accepted solution]

You will enter $0 for box 2a if you had a loss when you create Form 1099-R with codes PJ for the withdrawal of excess contribution.

 Please make sure you enter the full excess contribution amount (without earnings or losses) as withdrawn by the due on the penalty screen during the IRA contribution interview.

You will get a 2022 Form 1099-R  in 2023 with codes P and J for the withdrawal of excess contribution and earnings. This 1099-R will have to be included on your 2021 tax return and you have two options:  

• You can wait until you receive the 2022 Form 1099-R in 2023 and amend your 2021 return or
• You can report it now in your 2021 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2022 Form 1099-R into the 2022 tax return since the withholding is reported in the year that the tax was withheld. The 2022 code P will not do anything to the 2022 tax return but the withholdings will be applied to 2022.

To create a Form 1099-R in your 2021 return please follow the steps below:

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 2021?"
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 P and J
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.
11. Click "Continue" after all 1099-R are entered and answer all the questions.
12. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" if you are over 59 1/2 (if you are under 59 1/2 click "Continue")

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2020" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2021.

[jac310]

Great. Thank you!

[jdlavian]

When you say:

"Please make sure you enter the full excess contribution amount (without earnings or losses) as withdrawn by the due on the penalty screen during the IRA contribution interview."

Lets say (similar to original posters question) I accidentally contributed $6000 in 2022, married filing separate so i need to correct it, and withdrew $5550 in 2023 as there was a $450 loss.

I would enter 5550 in box 1?

When you say enter full excess contribution in IRA contribution interview, that means the "Federal > Deductions and Credits > Traditional and Roth IRA Contributions" section?

Thank you for all your help

@DanaB27 

[DaveF1006]

No, you would enter $6000, the full contribution amount in Box 1 of the 1099R to match the excess contribution amount you made originally. . 

To begin reporting the contribution amount that was returned to you, go to Federal > Deductions and Credits > Traditional and Roth IRA Contributions. 

As you proceed through the interview, the program will inform you that your contribution is too high. Then the next screen will tell you you have a penalty but then will allow you to enter a contribution amount withdrawn before the due date of your return. Here you will put in the full amount of the contribution, which is $6000.

@jdlavian 

[jdlavian]

@DaveF1006 

Thank you, so in summary for this specific example scenario I gave, there is nowhere that I enter the amount minus losses ($5550). The only number used is $6000 every time it asks for how much contributed or withdrawn?

So for: 

To begin reporting the contribution amount that was returned to you, go to Federal > Deductions and Credits > Traditional and Roth IRA Contributions. "Contribution withdrawn before due date of your return" i would enter 6000 or 5550?

[DanaB27]

Yes, you would enter $6,000 on the penalty screen as withdrawn by the due date during the IRA contribution interview (Federal > Deductions and Credits > Traditional and Roth IRA Contributions. "Contribution withdrawn before due date of your return").

You will get a 2023 Form 1099-R  in 2024 with codes P and J for the withdrawal of excess contributions and earnings. This 1099-R will have to be included on your 2022 tax return and you have two options:  

• You can wait until you receive the 2023 Form 1099-R in 2024 and amend your 2022 return or
• You can report it now in your 2022 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2023 Form 1099-R into the 2023 tax return since the withholdings are reported in the year that the tax was withheld. The 2023 code P will not do anything to the 2023 tax return but the withholdings will be applied to 2023.

To create a Form 1099-R in your 2022 return please follow the steps below:

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 2022?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution minus loss) $5,500
7. Box 2a $0
8. Box 7 enter J and P
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2023 Form 1099-R.

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2021" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.

@jdlavian 

[jac310]

Two answers here are giving contradictory information. Dave says to enter the full amount contributed in Box 1 on 1099R. Dana says to enter $5550. Which is it? 

[DaveF1006]

This is a revision from my earlier post. I agree with DanaB27 that $5500 should be entered in Box 1 of the 1099R and 0 in Box 2A. 

You will still enter $6,000 on the penalty screen as withdrawn by the due date during the IRA contribution interview (Federal > Deductions and Credits > Traditional and Roth IRA Contributions. "Contribution withdrawn before due date of your return").

{Edited 04/05/23} (1:236 PM PST} @jac310

[jac310]

So, $6000 should be reported in Box 1 Gross Distribution in TurboTax 1099-R creation, even though when you get the actual 1099-R, it will have a lower amount (ex. $5550)? Are they not supposed to match? Does the $5550 (the actual amount distributed back to you) number get entered anywhere in TurboTax?

[DanaB27]

Tax Expert DaveF1006 is referring to what to enter on the penalty screen during the IRA interview. Here you will enter the contribution amount of $6,000 to show that you removed the full excess contribution amount (as I mentioned in my post as well).

But the distribution amount in box 1 on the 2023 Form 1099-R will be the amount you received (distributed to you) which should be the contribution amount minus the loss. If you enter the 2023 Form 1099-R for the withdrawal of excess contribution minus loss then you will enter $5,500 for box 1 and $0 for 2a.

@jac310 

[jac310]

Thanks, Dana, for the reply. That's how I thought it was supposed to be done. However, in one of Dave's posts above he states the following....

---

@DaveF1006 wrote:

No, you would enter $6000, the full contribution amount in Box 1 of the 1099R to match the excess contribution amount you made originally. . 

[jac310]

Thanks for clarifying Dave!