How to input to turbotax return of 2024 Excess ROTH IRA contributions/earnings without schedule 5329 6% extra tax

[dgJuneau]

I made an $8,000 2024 excess contribution to my ROTH IRA. The custodian has withdrawn from the ROTH  the excess contribution and associated earnings. I need to report  on my 1040-SR line 4a the gross amount of the withdrawal and on line 4b the taxable earnings.  Using the steps I've found on-line to  add a 1099R to accomplish this Turbotax completes form 5329 (additional taxes on IRA)  and adds the $480 6% extra tax. Since the contribution was removed prior to the tax filing deadline I do not need to pay this.  How can I input this information to Turbotax without it calculating the extra tax?  Thank you for any help you can provide. 

[MinhT1]

If you withdrew your 2024 excess contribution to your Roth IRA before the due date of the 2024 tax return (April 15, 2025), make sure that you also withdraw the related earnings.

On your 2024 tax return, you do not report the excess contribution as it has been withdrawn. There is no 6% excise tax either as the excess has been withdrawn.

The earnings have to reported and taxed in 2024.

For this, you would create a 2025 form 1099-R with the total distribution (excess plus earnings) in box 1, the earnings in box 2a and code PJ in box 7. You then enter this 1099-R on your tax return, and the earnings will be taxed. When entering this form 1099-R, make sure to indicate that the year on the form is 2025, as this is a replica of the form you will receive for year 2025 in 2026.

If there is a loss, that loss is not deductible.

When you receive the 2025 form 1099-R with code PJ in box 7 (in 2026) for this withdrawal, there is no further action needed.

[dgJuneau]

Thank you for the information. However, as happened previously following similar instructions, turbotax still creates a form 5329 and calculates  on lines 23 through 25 a $480  (6% on $8,000) additional tax on the IRA contribution withdrawal that is brought forward to schedule 2 and then the 1040SR.  This is what I am having a problem with, keeping turbotax from calculating and adding this additional tax.  Thank you. 

[MinhT1]

You must have entered in TurboTax that you made a Roth IRA contribution of $8,000 in 2024.

Go back to the IRA contributions section and delete that contribution (as it has been withdrawn).

To go back to the IRA contributions section:

1. In TurboTax Online, open your return
2. Click on Search (magnifying glass icon) at the top right of your screen
3. In the Search box, enter IRA contributions and click Enter
4. In the search result box, click on Jump to IRA contributions
5. TurboTax will take you directly to the section where you can start entering or editing your IRA and Roth IRA contributions.

[harnerwil]

We also made Roth IRA Contributions and have had a Return of Excess Contribution.  If I am reading the description and response correctly,  I will go into Turbotax and create a document 1099R but put 2025 even though the tax year was 2024 and the Excess contribution was removed prior to filing our 2024 taxes?

[ThomasM125]

Yes, that is correct, say the Form 1099-R is for 2025. That is because the actual form you receive next year will say 2025 on it. The code "P" in box 7 says the taxable amount belongs in the year before the year listed on the Form 1099-R, so that is why you need to indicate it is for 2025.

@harnerwil 

[harnerwil]

Thank you.  I will go back and mark P.  I was marking 7 as it was showing that was the only option for 2024.

[JR20211]

In 2023 I made an excess Roth IRA contribution of $4,620 - there were $644 in earnings for a total of 5,264.  I contacted my brokerage and completed a Return of Excess Roth IRA Contribution form in February 2024 before filing my 2023 taxes.  On my 2023 tax return, on Form 5329 my excess contribution of  $4,620 is listed and after going through the Turbo Tax prompts, Line 25 has an amount of $277 (6%).  In January 2025 I received my 1099-R with Box 1 (Gross Distribution) $5,264; Box 2 (Taxable Amount) $644; Box 7 (Distribution Codes) PJ. 

When working on my 2024 tax return, going through the prompts I enter the 2024 Form 1099-R information and am advised that I may need to amend my 2023 tax return.  I have read where individuals can "create their own 1099-R" in advance of receiving it so the information can be entered on their tax return for the year in which earnings accrued.  I was not aware of this option when filing my 2023 tax return and would have expected Turbo Tax to walk me through that option at that time if it was valid.   Given the situation, do I need to amend my 2023 tax return so that I can include the $644 there or are there any other valid options at this point?  Thank you for your insights/guidance.  

 

[DanaB27]

Yes, if you didn't include the earning on your 2023 return, then you will need to amend your 2023 return to include the 2024 Form 1099-R with code PJ. Please see How do I amend my federal tax return for a prior year?

1. Click "Wages & Income" (under Federal) on the left
2. Scroll down and click "Show more" next to "Retirement Plans and Social Security"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Enter Form 1099-R information
5. On the "Which year on Form 1099-R" screen say that this is a 2024 Form 1099-R.
6. Click "Continue" after all 1099-R are entered and answer all the questions.
7. 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.

It seems you didn't indicate in TurboTax that you withdrew the excess contribution by the due date since you show the 6% penalty on Form 5329. Please follow these steps in the amend 2023 tax return:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Continue until the penalty screen and enter the excess contribution amount withdrawn.

Also, make sure in your 2024 return that you do not have the excess contribution carried over:

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 "Enter Excess Contributions" screen delete the excess that was carried over.

@JR20211