How to File Excess Roth Ira Contribution

[riri789]

Hi Metlife/turbotax experts, 

For 2023 I contributed an excess of 6500 to my roth ira. I realized that I overcontributed and so I withdrew the 6500 + earnings made through vanguard. However vanguard gave me an option to withhold 24% of the earnings for tax, which I selected & so i received 6500 + earnings - 24% to my bank accounts. I want to file the 1099-r as part of my 2023 tax return and Turbotax suggested i input it as a 1099-r where box 1 = 6500 + earnings - 24%, box 2 = earnings-24% & select p & j. I know that this is to account for the 10% that should be taken from the earnings due to withdrawing early from a roth ira but does filing this way also take into account the 24% that was already withheld ? If not, how can i properly file this 1099-r  for 2023 such that it takes into account the 24% that was withheld? 

[DianeW777 · Accepted solution]

This answer assumes the withdrawal of the excess contribution was in 2024.  In 2023, you will enter the total distribution ($6,500 contribution plus earning) in box 1 and the earnings in box 2a. On your 2023, do not make any adjustment for the federal withholding and do not enter it for 2023.

You will get a 2024 Form 1099-R in 2025 with codes P and J for the withdrawal of excess contributions and earnings. This 1099-R must be included in your 2024 tax return because of the federal withholding. However you should include on your 2023 tax return the earnings otherwise you will have to amend your 2023.

• You can wait until you receive the 2024 Form 1099-R in 2025 and amend your 2023 return or
• You can report it now in your 2023 return and then use the 1099-R when it comes in 2024 to include Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2024 Form 1099-R into the 2024 tax return since the withholdings are reported in the year that the tax was withheld. The 2024 code P will not do anything to the 2024 tax return income but the withholdings will be applied to 2024. You can enter zero taxable amount on your 2024 tax return.

To create a Form 1099-R in your 2023 return please follow the steps below:

1. Login to your TurboTax Account
2. Click on the "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2023?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter J and P
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2024 Form 1099-R.
11. Click "Continue" after all 1099-R are entered and answer all the questions.
12. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2022" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2023.

@riri789

[Edited: 04/03/2024 | 2:10 PM PST]

[riri789]

Hi Diane, 

thank you for your response. Just to confirm when you say enter earnings, that is the total earnings that i got on the 6500 not taking into the account the money that was withheld i.e. i made 100 on the 6500, vanguard withheld 24 and so i actually made 76, but i should enter it as 100 in box 2 on my 1099r in 2023 ? 

[DawnC]

Yes, the total earnings - 100.    The withholding amount will be reported next year.  

[riri789]

Hi Dawn, additionally, in the roth ira section of turbotax do i still need to say that i contributed 6500 and withdrew 6500 when it prompts me ? 

[ThomasM125]

The earnings would be the amount before the tax withheld, $100 it appears in this instance. The tax withheld is used to pay the tax due on the earnings, so the earnings are unaffected by the withholding.