Roth IRA excess contributions made in 2020 and 2021 - withdrew, but how to report?

[maddy082002]

Hello,

I made excess Roth IRA contributions in Aug 2020 of $6000 for 2020 and in Feb 2021 of $6000 for 2021.  These were the only two contributions ever made to this Roth IRA.  I realized both were in excess and have withdrawn all monies (contributions plus the earnings).   I have not filed my 2020 taxes yet.  The total distribution is $13,622, so the earnings are $3622, which I know I am responsible for paying taxes on and the 10% early withdrawal penalty.

Since the contributions are for two different calendar/tax years, how/what do I report for the earnings?  Is it possible to report all of it on my 2020 return and pay all taxes and penalty now, or do I need to split it up between two different tax years?  Since I would not receive a 1099 of the distribution until 2022, I believe I complete a substitute 1099?

Thank you

[MinhT1]

You do not need to complete a substitute 1099-R.

As the excess contributions are for 2020 and 2021, you should report half of the excess in each year. As the excess contributions are withdrawn before the due date of the return for 2020 and during 2021 for 2021, they are considered as not having been contributed.

As for the earnings, they are taxable for half the amount in each of the years 2020 and 2021 and are subject to the 10% penalty.

When you receive the 1099-R in 2022, no further action is needed.

[maddy082002]

Hello,

Sorry, I'm not quite understanding.

Can you tell me specifically where I report the earnings in my 2020 tax return if I do not have a 1099 for them and I am not creating a substitute one either?

The total distribution for both years is $13,952.83.   The excess contributions are $6000 for 2020 and $6000 for 2021.  Combined earnings is $1952.83.  When split in half, earnings are $976.50 for each year.

What form/box/section/amount do I enter for this in my 2020 return?

Thank you

[ThomasM125]

To report the earnings on the excess contribution, you should enter a Substitute form 1099-R and enter it on your 2020 return to report the 2020 earnings. You will see an option for this when you see the screen Tell us Which 1099-R You Have. 

Enter in box 1 the distribution amount. In box 2 enter the earnings. Enter code "P and J" in box 7. Work through the questions in TurboTax after you entered the 1099-R until you see a question regarding why you made the distribution, to which you will respond it was a return of an excess contribution.

[maddy082002]

But, since the distribution amount spans two calendar years, 2020 and 2021 - $6000 excess contribution in each year, should I just split it in half and report half the distribution/earnings on my 2020 return and then the other half on my 2021 return?  Then what do I do when I get the actual 1099R in 2022?  Do I basically ignore the amounts on there as I am entering it on my 2021 tax return and only report half since I am reporting the other half now?

Why did I get two different answers from Turbo Tax representatives?  One told me I didn't need to complete a substitute 1099R now and another representative did.

Thank you

[DanaB27]

Yes, you will split it in half.

You will enter the withdrawal of excess contribution and earning as a regular 1099-R. Using a substitute 1099-R might prevent you from being able to e-file and is generally only used if you cannot get a 1099-R issued which is not the case.

To create a 1099-R in your 2020 return please follow the steps below:

1. Open your return
2. Click on "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 2020?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning) $6,976
7. Box 2a enter the earnings $976
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 2021 1099-R.

The 2021 contribution will be similar but have codes 8 and J in box 7.

[maddy082002]

Thank you.

Code P that you say to enter in box 7 on my 2020 return says "Return of contribution taxable in 2019".  I made the first excess contribution in 2020.  Should I still be using code P b/c it says 2019?

Thank you

[DanaB27]

Yes, you will still select code P for box 7 and then click continue to select the year on your 1099-R (step 10 above). When you select 2021, then TurboTax will know that code P means "Return of contribution taxable in 2020".