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Level 1

Solved

Excess Roth IRA Contribution

Forum|Forum|6 years ago
January 31, 2020
4 replies
0 views

In February 2019 I made my 2019 Roth IRA contribution. While doing my taxes today, I realized my income was too high to contribute. I called my financial institution and requested a return of the excess contribution. How do I report this in my 2019 tax filing? Do I report I contributed to my Roth IRA? If yes, where do I report a timely return of the contribution?

Best answer by DanaB27

If you withdrew the complete contribution with all earnings then you do not have to include the contribution on your tax return.

You will get a 1099-R in 2021 for the withdrawal of the excess contribution which has to be included in your 2019 tax return. You have two options, you can wait and amend you 2019 tax return when you get the 1099-R or you can report it now by using these instructions

Solution Reporting of Withdrawal of an excess contribution

Solution from macuser_22

You can just report it now and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/of box 12 State withholding. Then you must enter the 2018 1099-R in to the 2018 tax return since the withholding is reported in the year that the tax was withheld. The 2018 code P will not do anything in 2018 but the withholding will be applied to 2018.

You would enter the 1099-R with the total distribution in box 1 (the contribution plus the earnings),

The earnings in box 2a,

Enter code "P" in box 7 (Top) - don t worry that it will say "taxable in 2016 "

Enter code "J" in box 7 (Bottom).

On the "Which year" screen say that this is a 2018 1099-R.

After the 1099-R summary screen press continue.

If you are over 59 1/2 then on the "Lets see if we can lower your tax bill" enter the box 2a amount in the "Another Reason" box to eliminate the 10% early withdrawal penalty on the earnings.

Enter the explanation for the excess contribution and that you are reporting a 2018 1099-R on your 2017 tax return to avoid having to amend in 2018.

The box 2a earnings will be taxable income reported on line 15b on the 1040 form and if under age 59 1/2 will also be subject to a 10% penalty on a 5329 form that will be reported on line 59 on the 1040 form.

DanaB27Answer

Level 15

If you withdrew the complete contribution with all earnings then you do not have to include the contribution on your tax return.

Solution Reporting of Withdrawal of an excess contribution

Solution from macuser_22

You can just report it now and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/of box 12 State withholding. Then you must enter the 2018 1099-R in to the 2018 tax return since the withholding is reported in the year that the tax was withheld. The 2018 code P will not do anything in 2018 but the withholding will be applied to 2018.

You would enter the 1099-R with the total distribution in box 1 (the contribution plus the earnings),

The earnings in box 2a,

Enter code "P" in box 7 (Top) - don t worry that it will say "taxable in 2016 "

Enter code "J" in box 7 (Bottom).

On the "Which year" screen say that this is a 2018 1099-R.

After the 1099-R summary screen press continue.

If you are over 59 1/2 then on the "Lets see if we can lower your tax bill" enter the box 2a amount in the "Another Reason" box to eliminate the 10% early withdrawal penalty on the earnings.

Enter the explanation for the excess contribution and that you are reporting a 2018 1099-R on your 2017 tax return to avoid having to amend in 2018.

The box 2a earnings will be taxable income reported on line 15b on the 1040 form and if under age 59 1/2 will also be subject to a 10% penalty on a 5329 form that will be reported on line 59 on the 1040 form.

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pillarsoftheearth

Level 2

Are codes P and J still valid when doing this for excess contributions made in 2019? And there's another most from macuser_22 giving the codes in the opposite order (J in top box, P in bottom) - does that matter? Link below.

https://ttlc.intuit.com/community/retirement/discussion/how-do-i-report-an-excess-contribution-made-to-my-roth-account-in-2016-on-my-2016-taxes-the-excess/00/382192

DanaB27

Level 15

Yes, codes P and J are still valid for excess contributions made in 2019 and withdrawn in 2020 by the due date. The order of the codes does not matter.

@pillarsoftheearth

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Drdok1

Level 2

Question for 2019 Return of Excess Roth contribution

I am over 59 1/2 and made a Roth contribution on 1/3/19 of $7000. (have not filed 2019 taxes yet)

Because my AGI is over the limit, I made an return of excess contribution of the $7000 plus the $2198 of profit for a total of $9198 returned on 2/27/20. I want to account for the excess contribute this 2019 tax year and was able to reconcile the $7000 contribution but do not know where to input the $2198 in turbo tax to pay taxes on this amount in my 2019 return. My question is how and where in Turbo tax to I account an pay tax for this $2198 of profit on my 2019 excess contribution. Thanks in advance for any answers on this.

DanaB27

Level 15

Yes, you are correct you have to account for the withdrawn excess contribution and earnings in 2019. You will get a 1099-R in 2021 with codes P and J but you can create a 1099-R now to include it in your 2019 tax return. Then you will not need to amend your 2019 return when you get the 1099-R in 2021.

To create a 1099-R in your 2019 return please follow the steps below:

Login to your TurboTax Account
Click on the Search box on the top and type “1099-R”
Click on “Jump to 1099-R”
Select "I'll type it in myself"
Select "I need to prepare a substitute 1099-R"
Box 1 enter total distribution (contribution plus earning) of $9,198
Box 2 enter the earnings of $ 2,198
Box 7 enter P and J
On the "Which year on Form 1099-R" screen say that this is a 2020 1099-R.
Continue until you get to the explanation screen and answer that you are reporting a 2020 1099-R on your 2019 tax return to avoid having to amend in 2019.

@Drdok1

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Drdok1

Level 2

Yes, you will select P and don't worry about it saying "Return of contribution Taxable in 2018" TurboTax will ask for which year the form was and you will answer 2020. Then TurboTax knows that the P stands for "Return of contribution Taxable in 2019".

You are on the correct page and yes all questions are about the 1099-R that you will get in 2021, but you are creating a substitute 1099-R.

If you do not feel comfortable creating a substitute 1099-R then you can wait until next year and then amend your 2019 tax return once you receive the 1099-R in 2021.

@Drdok1

Thanks for the additional information.

I completed the 1099R with the required information Gross distribution $9198 and $2198 as taxable. Turbo Tax brings up for 4852 to provide the explanation and states this is required to be sent with my e-filing. It was not mention before and wanted to verify that form 4852 is the correct form?

fubark

Level 2

I also have an excess contribution in 2019 but, in my case, my IRA has declined in value since that contribution. I have not withdrawn anything yet and I have not filed my taxes for 2019 yet. If I understand the instructions correctly, I should withdraw the amount equal to my contribution MINUS the loss since that contribution. When I to enter this amount into TurboTax, it says that I still have an excess contribution in the amount of that loss. Where do I designate this amount as part of my withdrawal and non-taxable?

ThomasM125

Level 15

You can only withdraw the amount of the excess contribution and have it not be taxable. Since you didn't have any earnings since you made the contribution, you wouldn't have to pay any tax on earnings.

So, when you enter your IRA contribution in TurboTax, you will be notified that you made an excess contribution and need to withdraw it, and check a box to say you will or did do so. That is all you need to do.

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mzuccaromazcpa

Level 2

I made a contribution to my 2020 Roth IRA. I withdrew the contribution along with income it earned. How and where do I report this>

macuser_22

Alumni - Champ

You should receive a 1099-R next January, 2022 to report it on an amended 2020 tax return.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**