Return of Excess Roth Contribution

[davekrause]

Reporting excess Roth IRA Contribution

For tax year 2021 I contributed after-tax dollars to a Roth IRA account to later find out I was not eligible to make this contribution. To avoid the 6% I reached out to the brokerage company in early 2022 and have already withdrawn the contributions along with the earnings on them.  I understand that I will not receive a 1099-R in 2022 that indicates this access contribution removal, but I should report the earnings as income on form 1040, and fill out form 5329 for my 2021 return. Do I also fill out a 1099-R in TurboTax 2021 to file with my return. If so, what codes should I select for Box 7, do I also fill in boxes 8, 9a and 9b? If I originally set up the Roth Account in 2019 do I enter that info in Box 11?

[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:

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 2021?"
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 P and J 
9. Click "Continue"
10. 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.

No, do not enter anything in boxes 8, 9a, 9b, and 11.

[davekrause]

1. When entering codes in Box 7, if I put Code P in 1st Code box and then put Code J in 2nd Code Box TurboTax reverses it and changes it to J in 1st Code box and P in 2nd Code box. Does this matter?
   

1. Also does anything go into box 5?

[DanaB27]

No, it doesn’t matter which code is first. It is fine that TurboTax changes PJ to JP.

No, do not enter anything in box 5.