Excess Roth IRA contributions for prior years

[DanaB27]

Yes, if you reported the 2022 Form 1099-R with code PJ on your 2021 tax return then you only need to enter it on your 2022 tax return if you had taxes withheld. If you didn’t have any taxes withheld then you can ignore it for the 2022 tax return. Generally, it is best to avoid withholding taxes with the return of excess contributions and earnings because they won't be applied to the same year when Form 1099-R has codes PJ.

Yes, since you had all excess contributions removed you shouldn’t have any penalty calculated on Form 5329 for 2022:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Do you have any Excess Roth Contributions" answer "Yes"
5. On the "Enter Excess Contributions" screen enter the $50 that should be carried over and that you removed in 2022 with the 2022 Form 1099-R code J.

To enter Form 1099-R with code J:

1. Login to your TurboTax Account 
2. Click on "Search" on the top and type “1099-R” 
3. Click on “Jump to 1099-R” and enter all your 1099-Rs
4. Click "Continue" on the "Review your 1099-R info" screen
5. Answer all the questions and make sure you enter the net contributions prior to 2022 (include the $50 excess contribution in this amount) on the "Enter Prior Year Roth IRA Contributions" screen
6. Answer the remaining question.

@fluxquantum94 

[fluxquantum94]

Thanks again for all the help @DanaB27 So despite fidelity reporting the 1099-R for both my 50$ and 237.04$ early distribution from 2022, I can simply omit the 237 amount in my turbo tax (I used the turbotax auto import feature so I have 1099Rs already filled out essentially)? Do you know offhand why a gross distribution with code P would automatically be considered an excess contribution in this case?

[DanaB27]

Yes, if you didn’t have taxes withheld then you don’t need to enter the 2022 Form 1099-R with codes J and P on your 2022 tax return. It belongs on the 2021 tax return.

Code P on Form 1099-R indicates “Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in the previous year”. Therefore, on a 2022 Form 1099-R code P means “Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2021”. Please see Table 1. Guide to Distribution Codes (Instructions for the 2023 Form 1099-R) for additional information.

@fluxquantum94 

[fluxquantum94]

@DanaB27 Hi Dana, I just realized something. Looking back at my 2021 Tax returns, the gross distribution of 237.04 that I reported with codes PJ (filled in myself as I didn't receive a 1099-R at the time).

I had federal income tax withheld as a request even though I took a loss - I . But the 1099R form I received for the 2022 tax year regarding that very transaction does not mention it at all. Do I need to manually input that federally withheld tax amount in my 2022 return then?

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Additionally, for tax year 2021, I received in 2022 a 1099 R reporting codes PJ for

gross distribution of 1,001.74, taxable amount 141.74, and federally withheld tax of 14.17. I'm trying to get confirmation if that can be closed out as it was to address a 2020 excess contribution and it didn't seem to have a direct impact on my tax liability aside from the withheld tax automatically taken when I reported this in my 2021 return. The confusion arising due to the fact that I thought the 237.04 excess contribution I performed in 2022 should have been closed out in similar fashion.

Thank you for your assistance.

[DanaB27]

No, if your received 2022 Form 1099-R with code PJ doesn't show any tax withheld then you won't enter it on your 2022 tax return. You can check with the issuer if you believe that taxes were withheld and why they aren't listed on your Form 1099-R.

The taxes withheld on the second 2021 Form 1099-R code PJ will be applied to your 2021 tax return and therefore the Form 1099-R will have to be entered on your 2021 tax return. TurboTax will ignore the distribution amount because of the code P but apply the withheld taxes to 2021.

Yes, you won't have to pay the 6% penalty on the 2020 excess since you removed it plus earnings before the due date of the 2020 return. Please make sure the 2020 excess didn't carry over to 2021.

@fluxquantum94