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[ee-ea]

The best way to get an answer is to ask the question here!

[cft]

I have earned income from a part time job. I put 90% of that earned income, about $8000 into the company 401K and showed that when I entered my W2. Therefore, it showed that about $1000 in Block 1 and, $8000 in Blocks 3 and 5 and about $7300 in Block 12a with code D (ret. plan box checked.)

When I later imputed my ROTH IRA contribution of $5000 in Turbo Tax, it showed that I owed about $2000 in taxes after inputting my IRA contribution.  Can you please help me understand what happened and how to fix this? My research shows that I can contribute to both a ROTH IRA and a 401K. What am I doing wrong in Turbo Tax?  Thank you very much for your support.

[BillM223]

@cft

First, where on your return is this $2,000 in taxes appearing? Schedule 2 (1040)? On what line?

Second, what is your adjusted gross income?

[cft]

Hi Bill,

I'm not sure which line the penalty is showing in because I am still in the middle of the Turbo Tax preparation of my tax return.  I just checked and it says that I had an excess contribution because my EARNED INCOME was only $1049.  This is because I put 90 percent of my income into the company 401K. My total Social Security/Medicare wages are $8429.00.  The penalty actually looks like it is $300, not $2000. Sorry I overstated that. That is the current full taxes owed at the moment while I am preparing the Turbo Tax return.  

So I guess I did not understand the IRA tax rules? I thought I could contribute to both a 401K and an IRA? But I did not realize that in contributing to a 401K, that it would reduce my EARNED INCOME? Is that what I did wrong? So my last question is, if I keep the money in the IRA, will I continue to be penalized each year? Or is this penalty (about $300 at the moment) a one time penalty?  Thank you in advance.  

[BillM223]

"if I keep the money in the IRA, will I continue to be penalized each year? "

Yes, 6% a year. You would be best served to withdraw the excess by July 15th (this year only).

"I'm not sure which line the penalty is showing in because I am still in the middle of the Turbo Tax preparation of my tax return. "

I assume that you are using the Online product? If so, you can look at your real 1040 and Schedules 1, 2, and 3 at any time.

On the far left, click on Tax Tools, then click on Tools underneath it, then click on View Tax Summary in the center, then click on Preview My 1040 back on the left. Now you will be able to scroll through your 1040 as well as the three Schedules (if you have them).

Take a look and see where the tax appears on Schedule 2 (I assume this is where it will appear).

If you are using the CD/download product, you can go into Forms mode and see every form at any time.

***I am not clear on something - did you have other earned income besides this one W-2?

[cft]

Hi Bill,

***I am not clear on something - did you have other earned income besides this one W-2? 

No, I did not have other earned income. I am a retiree and I thought if I took a part time job, I could put the income I earned in a tax sheltered 401K and also contribute to an IRA.  Can you tell me if this is wrong thinking? It seems that since I put most of my earnings in the company 401k, that I am now only able to contribute to the amount showing in Block 1 of my W2, which is $1049?  Also, I'm not sure how to correct the IRA overpayment? Any help would be most appreciated.  Thank you in advance.

[BillM223]

"Also, I'm not sure how to correct the IRA overpayment?"

You need to contact your IRS custodian and request of withdrawal of excess contributions. There is possibly a form online at the custodian's website for this; otherwise, speak to a customer service rep - this is a common enough thing that people do.

Please do this tomorrow (April 15th). Excess contributions to an employers-sponsored plan must be withdrawn by April 15th, and I can't find at the moment whether or not this also applies to IRAs. Better safe than sorry.

When you are entering the 1099-R into TurboTax, I believe that TurboTax will ask you if you want to withdraw the excess by the due date of the return. Answer "yes". 

Yes, you can contribute to both, but because the 401(k) contribution reduced your taxable income, the limit was imposed on the Roth IRA.

[cft]

Hi Bill,

Just a few last questions.

You wrote:

"You need to contact your IRS custodian and request of withdrawal of excess contributions. There is possibly a form online at the custodian's website for this; otherwise, speak to a customer service rep - this is a common enough thing that people do."  Did you mean IRA Custodian?

You wrote:

"When you are entering the 1099-R into TurboTax, I believe that TurboTax will ask you if you want to withdraw the excess by the due date of the return. Answer "yes". "  An IRA contribution is recorded on Form 5498. So not sure what you wrote?

Also, the excess contribution was to the IRA, not the 401K. I need to fix the over payment to the IRA.

Also, don't I have until July 15 to fix this?  Since the tax deadline is now July 15?

thank you in advance.

[samwright]

call this number 1-877-559-8824

[DaveF1006]

Please select this link for information to contact phone support

[joe5050]

I have turbo tax business for estates and trusts. form 1041, does turbo tax have a ct 1041 you can purchase

[KathrynG3]

Yes, TurboTax can do this. To purchase the Connecticut 1041, select the STATE TAXES tab and purchase the state. 

[dtinker]

Do I fill out a 1098 if I did not receive one?

[xmasbaby0]

@dtinker What are you trying to do?   What do you mean by "fill out" a 1098?   For what?   Are you asking about a 1098 for mortgage interest?  A 1098T for tuition?  A 1098E for student loan interest?