Roth IRA excess contributions 2021

Forum|Forum|4 years ago
February 20, 2022
2 replies
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Because of my AGI, I became ineligible to contribute to my Roth IRA in 2021. However, I had already contributed $5,000 between Jan 2021 and Dec 2021. In Feb 2022, I withdrew the excess contribution of $5,000. I also withdrew the earnings on the excess contribution. It is my understanding that I have to pay taxes on the excess contribution earnings in tax year 2021. I'm not sure how/where to enter the excess contribution withdrawel of $5,000 or the earnings on the excess contribution. I don't have a 1099-R. I have not filed my taxes yet for 2021.

TurboTax Basic Windows

Best answer by DanaB27

Yes, you will get a 1099-R 2022 in 2023 with codes P and J for the withdrawal of excess contribution and earnings. This 1099-R will have to be included on your 2021 tax return and you have two options:

You can wait until you receive the 1099-R 2022 in 2023 and amend your 2021 return or
You can report it now in your 2021 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 2022 1099-R into the 2022 tax return since the withholding is reported in the year that the tax was withheld. The 2022 code P will not do anything in 2022 tax return but the withholding will be applied to 2022.

To create a 1099-R in your 2021 return please follow the steps below:

Login to your TurboTax Account
Click on the "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Answer "Yes" to "Did you get a 1099-R in 2021?"
Select "I'll type it in myself"
Box 1 enter total distribution (contribution plus earning)
Box 2a enter the earnings
Box 7 enter J and P
Click "Continue"
On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2020" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2021.

Please see What happens if I made an excess Roth IRA contribution for future references.

DanaB27Answer

Level 15

You can wait until you receive the 1099-R 2022 in 2023 and amend your 2021 return or
You can report it now in your 2021 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 2022 1099-R into the 2022 tax return since the withholding is reported in the year that the tax was withheld. The 2022 code P will not do anything in 2022 tax return but the withholding will be applied to 2022.

To create a 1099-R in your 2021 return please follow the steps below:

Login to your TurboTax Account
Click on the "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Answer "Yes" to "Did you get a 1099-R in 2021?"
Select "I'll type it in myself"
Box 1 enter total distribution (contribution plus earning)
Box 2a enter the earnings
Box 7 enter J and P
Click "Continue"
On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2020" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2021.

Please see What happens if I made an excess Roth IRA contribution for future references.

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jcavenia

Level 2

Because I had no earned income I was ineligible to contribute to my Roth IRA in 2021. However I contributed $3000 in December. I withdrew the excess contribution in February of 2022. The amount calculated by the brokerage was $2783.50 showing a loss of $216.50. When doing the 1099-R what do I put in Box 1, the original $3000 or the $2783.50? What to I put in box 2a, a negative $216.50 (loss) or some other amount? Do I put anything in box 3? Do I put a check in the IRA/SEP/SIMPLE box?

DaveF1006

Level 15

No put in $3000 in Box 1 and leave Box 2a blank or unless there were earnings, put the amount of the earnings in Box 2A. Be sure to put Codes P & J in Box 7 so that it doesn't make this a taxable event except for the earnings, if there were any.

@jcavenia

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mr_rj

Level 2

This advice is contradictory to the advice given in the link below. Box 1 should be either contribution + earning or contribution - loss. Box 2a should be 0 in case of loss (negative net attributable ) or the earning incase of a positive net attributable.

https://www.google.com/amp/s/ttlc.intuit.com/community/tax-credits-deductions/discussion/excess-roth-contribution-net-income-attributable-is-negative/00/2512136/amp

DanaB27

Level 15

First, you will enter the excess contribution amount withdrawn by the due date (without earnings and losses) on the penalty screen during the IRA contribution interview.

Click on "Search" on the top right and type “IRA contributions”
Click on “Jump to IRA contributions"
Enter the contribution amount without earnings and losses as withdrawn by the due date on the penalty screen

You will get a 2022 Form 1099-R in 2023 with codes P and J for the withdrawal of excess contribution and loss. This 1099-R will have to be included on your 2021 tax return and you have two options:

You can wait until you receive the 2022 Form 1099-R in 2023 and amend your 2021 return or
You can report it now in your 2021 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 2022 Form 1099-R into the 2022 tax return since the withholding is reported in the year that the tax was withheld. The 2022 code P will not do anything to the 2022 tax return but the withholdings will be applied to 2022.

To create a Form 1099-R in your 2021 return please follow the steps below:

Login to your TurboTax Account
Click on the "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Answer "Yes" to "Did you get a 1099-R in 2021?"
Select "I'll type it in myself"
Box 1 enter total distribution (contribution minus loss)
Box 2a enter $0
Box 7 enter J and P
Click "Continue"
On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.

@kbr1988

@mr_rj Yes, box 2a will be $0 when you had a loss.

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kbr1988

Level 2

@DanaB27 Thank you!

I'm a little confused by some wording. To confirm, for the part below would I enter my original contribution of $6000.00 or would it be $2,500 (the amount after removing $3,500 to get under the max)? After losses I received $3,429.44 but it looks like I don't enter any earnings or losses.

"Enter the contribution amount without earnings and losses as withdrawn by the due date on the penalty screen"

Thank you again!