Removal of Excess Traditional IRA Contribution

sp16673 · ‎February 1, 2024

In FEB 2023, I made $7500 contributions to my and my spouse's trad. IRA's but was ineligible to do so as we would not receive W-2's in 2023, just 1099's (retirement income). Without contacting the broker, I withdrew both contributions on my own to correct the problem. Now, I received 1099R's from broker indicating that my withdrawals were "normal distributions" which are taxable. How do I use TurboTax to show that my Excess Contributions were removed (with no gain/loss) quickly after making them in early 2023? I just want to zero out the mistake and explain away the 1099R received from my broker. Thanks!!!

ThomasM125 · ‎February 5, 2024

The Form 1099-R should have had the code "8" in box 7 to indicate that the distribution was a return of contributions taxable in 2023. You probably can't get the Form 1099-R corrected, so a work-around solution would be to indicate in TurboTax that you made non-deductible contributions to your IRA in prior years. You will be asked to enter the amount of your basis at end of 2022, to which you will enter $7,500 in this instance. You will then be asked to enter you balance at end of 2023 for which you will enter $0. Then the distribution will not show as taxable on your return. You will see these questions after you enter your Form 1099-R.

[Edited 2/5/24 at 4:02 PM PST] @sp16673

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sp16673 · ‎February 6, 2024

That is a brilliant strategy! This never would have occurred to me as it is working the problem backwards to get the same results I want on the tax return in TurboTax. I very much appreciate you taking the time to read my post and reply in a timely and thoughtful manner. I pray God's richest blessings on you and your family. Thanks again, Steve.