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Level 3
posted Feb 14, 2021 8:39:31 PM

Turbotax handling of withdrawal of excess Roth contributions

A $7000 contribution I made in January 2020 toward a new Roth IRA account for tax year 2020 has become an excess Roth IRA contribution (I earned too much!). I already made a withdrawal of this excess contribution plus the $110 dividend from TD Ameritrade this month. Turbotax helpfully warns me that I currently have a penalty unless I do a withdrawal now, so I entered $7000 into the box "Contribution Withdrawn Before Due Date of Your Return" in the page "You Currently Have a Penalty".

 

In the final form printout ready to be filed to the IRS, there is nothing mentioned about this $7000 Roth IRA Contribution and nothing about the subsequent withdrawal of the excess contribution.

 

Shouldn't Turbotax report $7000 as a Roth IRA Contribution and it should also report a 1099-R form for the withdrawal of the excess contribution? Also, where to declare this $110 dividend made in 2020 from this Roth IRA account?

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1 Best answer
Expert Alumni
Feb 15, 2021 6:32:52 AM

No, TurboTax is showing your entries correctly. You can see this on the IRA contribution worksheet lines 19 and 25.

 

You will get a 1099-R 2021 in 2022 with codes P and J. This 1099-R will have to be included on your 2020 tax return and you have two options: 

  • You can wait until you receive the 1099-R  2021 in 2022 and amend your 2020 return or
  • You can report it now in your 2020 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 2021 1099-R into the 2021 tax return since the withholding is reported in the year that the tax was withheld. The 2021 code P will not do anything in 2021 tax return but the withholding will be applied to 2021.

 

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

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

 

3 Replies
Expert Alumni
Feb 15, 2021 6:32:52 AM

No, TurboTax is showing your entries correctly. You can see this on the IRA contribution worksheet lines 19 and 25.

 

You will get a 1099-R 2021 in 2022 with codes P and J. This 1099-R will have to be included on your 2020 tax return and you have two options: 

  • You can wait until you receive the 1099-R  2021 in 2022 and amend your 2020 return or
  • You can report it now in your 2020 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 2021 1099-R into the 2021 tax return since the withholding is reported in the year that the tax was withheld. The 2021 code P will not do anything in 2021 tax return but the withholding will be applied to 2021.

 

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

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

 

Level 3
Feb 15, 2021 7:45:07 PM

Thank you @DanaB27,  I followed your instructions and created a 1099-R form "Distributions from Pensions, IRAs, etc" but in the final printout, it shows "Keep for your records" and therefore it will not be included in the 2020 Tax Return. What's the point of creating this 1099-R if it will not be sent to the IRS ? How can this 1099-R be included in the E-filing?

Level 15
Feb 15, 2021 7:52:00 PM

@tta wrote:

Thank you @DanaB27,  I followed your instructions and created a 1099-R form "Distributions from Pensions, IRAs, etc" but in the final printout, it shows "Keep for your records" and therefore it will not be included in the 2020 Tax Return. What's the point of creating this 1099-R if it will not be sent to the IRS ? How can this 1099-R be included in the E-filing?

The TurboTax "1099-R" is not an actual form.    It is simply a data input screen.  What is sent to the IRS is the 1040 form with the distribution amounts on line 4  and your explanation statement  for the code P.