Excessive Roth IRA contribution correction without 1099-R

[mosier005]

Hello, I would like to report the income attributed to the excess contribution to my husband's Roth IRA in 2020. He made a contribution before we got married and we later found out our income was too high to qualify. He filed the paperwork to remove the excess contribution plus gains/earnings, and Fidelity completed this step. We will get a 1099-R next year that will report this, however, my understanding is the earnings are subject to tax this year. We know the taxable amount. I'm worried if we don't report the earnings now, we will have to file an amended return for 2020 next January after we receive the 1099-R. Any advice would be greatly appreciated!

[DanaB27]

Yes, you will get a 1099-R  in 2021 with codes P and J. This 1099-R will have to be included on your 2020 tax return and you have two options: 

• You can wait until you receive the 1099-R in 2021 and amend your 2020 return or
• You can report it now in your 2020 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 2021 1099-R into the 2021 tax return since the withholding is reported in the year that the tax was withheld. The 2021 code P will not do anything in 2021 tax return but the withholding will be applied to 2021.

To create a 1099-R in your 2020 return please follow the steps below:

1. Open TurboTax
2. Click on "Search" on the top and type “1099-R”
3. Click on “Jump to 1099-R”
4. Select "I'll type it in myself"
5. Box 1 enter total distribution (contribution plus earning)
6. Box 2a enter the earnings
7. Box 7 enter P and J 
8. On the "Which year on Form 1099-R" screen say that this is a 2021 1099-R.

[mosier005]

Thank you very much for your reply! Fidelity did not withhold taxes so it sounds like I would be ok to enter an assumed 2021 1099-R in this year's tax return with the total distribution and taxable portion as stated in your second option. We would very much prefer to not amend our 2020 return over what amounts to less than $30 in gains from an excessive Roth IRA contribution. Thanks again!

[mosier005]

One additional follow-up after attempting to file this 1099-R. Since I do not have the form and will not have it until next year, how can I input the address and payer TIN as required? Can I file without this information. It is a Roth IRA from Fidelity if that helps. Perhaps someone may know what this information would be, thanks!

[DaveF1006]

I would suggest reporting the withdrawal of the excess contribution on your 2020 return in the following manner.

1. Open (continue) return if you don't already have it open.
2. Inside TurboTax, search for 1099-R and select the Jump to link in the search results.
3. Answer Yes on the Your 1099-R screen,
4. Click on the box that you are creating a substitute 1099-R
5. Then select Continue.
6. in order to create a substitute 1099-R, you will need to obtain and name, address, and payer TIN as required so you can record the information properly on the form. You may need to contact Fidelity for this information or perhaps you can get information from their website.. 

The codes you will need for box 7 are J and P. Since this is a Roth IRA the only amount that is taxable are any earnings on the excess contribution. 

You will receive a 1099-R for the withdrawal in 2021 you do not need to report the information since you have reported it on your 2020 tax return.