Excess Roth IRA Contribution

[Drdok1]

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]

Yes, you are correct you have to account for the withdrawn excess contribution and earnings in 2019.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:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-R”
3. Click on “Jump to 1099-R”
4. Select "I'll type it in myself"
5. Select "I need to prepare a substitute 1099-R"
6. Box 1 enter total distribution (contribution plus earning) of $9,198
7. Box 2 enter the earnings of $ 2,198
8. Box 7 enter P and J 
9. On the "Which year on Form 1099-R" screen say that this is a 2020 1099-R.
10. 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

[Drdok1]

Thanks for the info but having trouble still.  

I navigated to the 1099-R section and Typed "i'll type it myself"

Selected "I need to prepare a substitute 1099-R" 

This bring up the screen with Payer name, federal ID and blocks 1 Gross distribution; 2A taxabl Amount etc.  This is mandatory, Right? 

In block 7 "Select a code that matches Box 7 of your 1099-R" -- The only P choice is "P-Return of contribution Taxable in 2018"   Should I check this block even though this is for 2019?    (J-Early distribution from a Roth IRA - looks correct.)

 Also all of the questions assume I have a 1099-R which I won't get until 2021.  

I think I may not be on the right page with your instructions. 

Can you help with my misdirection and confusion?

Thanks, 

Drdok1

[DanaB27]

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 

[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?          

[KarenJ2]

Yes, you should have Form 4852 included with your return when filing.    Form 4852 serves as a substitute for Form 1099-R.  

[emhartman]

I'm in the Roth IRA excess contribution boat for 2019.  The excess and earnings have been returned in 2020 (prior to filing 2019).  I've followed all the instructions in this "thread" and did a substitute 2020 1099-R.  However, my form 5329 is still penalizing me the 6%.  I can't figure out where form 5329, line 20 ("2019 distributions from your Roth IRAs"), pulls from (mine says 0, triggering the 6% penalty).  Any help would be appreciated.

[DaveF1006]

Don't even attempt to report this in your 2019 return.Wait until next year to report the 2020 1099R you have received. If you try to report it this year,  you will create more problems than it is worth in 2020. 

[emhartman]

Not sure I follow DaveF, are you saying to not report the 2020 1099-R, but still report that the excess contribution has been returned?  I don't want to pay a 6% penalty, for an honest mistake, for even one year.  So how do I avoid the 6% penalty?

[DaveF1006]

You won't have to pay the excise penalty if you returned the contribution by 04/15/2020 and report in your return that you returned it. Next year, you will receive a 1099R for the return of the contribution, which is a code P, return of excess contribution. The only taxable event in that 1099R if earnings were earned in excess of the distribution.

[fubark]

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]

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.

[smithdf5307]

I have a similar situation where I have exceeded the income level for 2019. I did a Rollover IRA conversion to a Roth IRA with my Fidelity account. I cannot do a re-characterization per the change in the tax law. If I roll all of the money from the ROTH IRA back into the Rollover IRA will that negate the excess contribution penalty? Because it was a rollover it was my understanding that it was not considered an early withdrawal as I am not 59 1/2.

[mulberry64]

I contributed $6996 (I am over age 50) to a ROTH IRA in 2019.  When completing my taxes in March, I discovered my income was too high to qualify for a ROTH contribution.  Per TurboTax, I have three options.  I consulted with my financial advisor.  He recommended recharacterizing to a TRADITIONAL IRA.  I changed my entry on TurboTax to reflect a contribution to TRADITIONAL IRA only (the only way to avoid the penalty).  Months later, I received a Form 5498 which states my contribution as a ROTH.  Should I file an amended return?

[Lost2020]

It is very helpful on your explanation for taking care the excess Roth contribution with 2 options. However, I did not see the 2nd option -- wait till later when 1099-R is received in 2021.   Can you please help -- when I try to amend 1040x using my last year 2019 Tax return by adding 1099-R  but the P/J code causes  no change on refund ($0)?  Per all these articles I've read, basically, I will have to amend and report the earning for my $7000 excess Roth contribution even I've withdrawn on Feb 2020 before 2019 tax filing date (April 3, 2020).  Do I just ignore the P and just use the J code in the 1099-R TurboTax form?  If so, it reflects there is Federal Tax Due to 6% penalty + tax whole contribution, this doss not sound right?   I think I should pay only 10% of $7000 excess contribution, plus tax on the earning generated from the $7000 contribution as ordinary income?   But I just don't know where to start with TurboTax, please help.   Thanks!