ROTH IRA Excessive Contribution

[chanvenkat]

Hello,

While i was filing my tax return for the year 2022, TT claimed that i have excess contribution in ROTH IRA and i need to remove around $4400 something from my Roth IRA (not sure about the right amount). Based on the explanation i received from the expert, i filed my tax return for 2022 and removed the excess contribution later from my ROTH IRA of amount $3600. I received 1099-R form for the year 2023. What am i supposed to do here? Do i need to file this for 2023 or do i need to amend my 2022 return? If yes, the taxable amount in column 2a should be changed?  How can i know what is the exact amount i should have removed and what if i dont?

[DanaB27]

To confirm, your 2023 Form 1099-R has codes P and J to indicate the withdrawal of excess contributions plus earnings? 

If yes, and if you did not have any tax withholdings in box 4 and 14 then you do not need to enter it on your 2023 return.

On your 2022 return did you enter the excess amount as withdrawn by the due date on the penalty screen (TurboTax should have told you how much was excess contribution)? If you entered it correctly your 2022 return should not have Form 5329 part IV filled out.

The earnings reported in box 2a must be included on your 2022 return. If you did not create a Form 1099-R when you filed your 2022 return then you will need to amend your 2022 return and add the 2023 Form 1099-R with code P and J. Do not change the amount in box 2a. You can check you Form 1040 line 4b if the amount in box 2a was included on your 2022 return. 

Please see How do I amend my federal tax return for a prior year?

[chanvenkat]

Thank you Dana for the quick response. Yes the 1099-R form for the year 2023 has codes P and J, the gross  distribution amount mentioned in box 1 is  $3629.85, the box 2a taxable amount is 0.00, the box 4 and 14 are blank. This confirms that shouldn't file this for 2023 return. Appreciate it.

Incase of 2022 return, yes, the turbo tax showed the excessive contribution as $4400. I removed the excessive contribution of $4400 with help of financial institution in the month of April 2023 but were able to remove $3629.85 from principle/contribution of 2022 but the remaining $770.15 went as a loss but the taxable amount in box 2a is 0.00 in 1099-R form. 

I checked form 1040 line 4b is blank and 2a is 0 in the 2022 tax return.

If there is a loss, then what i need to do while try to amend my return in 2022. Do i need to still remove remaining 770.15 from ROTH IRA as excessive contribution?

[DanaB27]

Yes, you should have enter the $4,400 excess contribution as removed on the penalty screen at the end of the IRA contribution interview of your 2022 return. Another option is to not enter the Roth IRA contribution that your withdrew when you go through the IRA contribution interview.

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 of $4,400 as withdrawn.

You should not have any penalty calculated on Form 5329 since you removed the excess contribution (with a loss) in time.  You can verify this by checking Schedule 2 line 8.