How to enter the excess contribution to IRA and removal of the excess contribution?

[Ravi Ammamuthu]

For the tax year 2022, I made a $6000 contribution to both Traditional and Roth IRA separately. Later, I found that this was a combined limit of only $6000. Hence, I called fidelity in 2023 before April 15th and they returned the excess Traditional IRA contribution. But they told me that they would send 1099-R for the return only next year. For the tax year 2022, they have sent form 5498 both for the Traditional and Roth IRA.

The question I have is, how do I enter the removal of the excess contribution for 2022 now when I file the tax. Now that Fidelity notified IRS on the contribution of both Traditional and Roth IRA, need help on the below

1. How do I enter the contribution of both the traditional and Roth IRA in the deductibles section?

2. How to enter the removal of excess contribution of Traditional IRA (not and Roth IRA) without receiving the 1099-R for this year from the brokerage ? Please send the complete details on entering for all the fields.

[Anonymous_]

@dmertz should probably be able to answer your question.

[fanfare]

Did you use the "removal of excess" form which is required in this situation?

@Ravi Ammamuthu 

[dmertz · Accepted solution]

1.  The problem with entering this into TurboTax is that TurboTax treats the Roth IRA contribution as being the excess contribution rather than treating the traditional IRA contribution as being the excess.   To accommodate TurboTax you'll need to force the traditional IRA contribution to be an excess amount by entering, say, $6,001 as the amount contributed to the traditional IRA, then, when TurboTax asks how much was returned, enter $6,001.  The actual amount will appear nowhere on your tax return but this will force TurboTax to prompt you to complete an explanation statement for the return of the traditional IRA contribution where you will indicate that actual $6,000 amount contributed and the gain/loss-adjusted amount distributed.

2.  If the distribution was adjusted for gains rather than a loss and the original contribution was made in 2022, you'll need to enter the 2023 Form 1099-R into 2022 TurboTax as if you have already received it so that the gain can be included in your 2022 taxable income.  This Form 1099-R will have the distribution amount in box 1 ($6,000 plus the gains), the gains in box 2a, P in box 7 and the IRA/SEP/SIMPLE box marked.  (There is no early-distribution penalty on the gains because the SECURE 2.0 Act eliminated that for such distributions occurring after December 29, 2022.)  Presumably no taxes were withheld because doing so unnescessarily complicates things.  Be sure to indicate in the follow-up questions that the form is a 2023 Form 1099-R.  If you don't have the actual payer information you can make that up since the details of this form will not be present in your filing.  With respect to your filing, your explanation statement takes the place of the actual Form 1099-R.  If there was instead a loss, nothing needs to be entered.  If the contribution was made in 2023, it's possible that the 2023 Form 1099-R will have code 8 and the gains will need to be reported on your 2023 tax return instead.