We made an excess traditional IRA contribution

[teller307]

So, we received a 1099-R form for 2021 and for the box 7, it has a code 8.

We search online and it said it is a return of excess contribution.

For box 2a - taxable amount is $0.

The story is we believed that our income has exceed the traditional IRA contribution limit for 2020 and 2021.

But we opened a traditional IRA in 2020 by mistake, and contributed  $2200 to the account (with after tax money) and contributed another $1000 to the account in 2021. (same with after tax money)

We have total contributed $3200 to the traditional IRA and we closed it early 2021 with a gross distribution $3,462.

Now we are doing our tax, and not sure how do we report the contribution and distribution. Since $3200 is contributed with after tax money, do we just report $262 income for 2021? (plus 10% early withdrawal penalty as we are under 59 years?)

And what kind of forms will be used for reporting?

Thanks.

[DanaB27]

Yes, you will enter the Form 1099-R as shown but you might want to check with your institution why they didn't report the earnings in box 2a (you mentioned you had earnings) before moving forward.

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”

The Form 1099-R instructions state:

"If a regular contribution is made to a traditional or Roth IRA that is later revoked or closed, and a distribution is made to the taxpayer, enter the gross distribution in box 1. If no earnings are distributed, enter 0 (zero) in box 2a and Code 8 in box 7 for a traditional IRA and Code J for a Roth IRA. If earnings are distributed, enter the amount of earnings in box 2a. For a traditional IRA, enter Codes 1 and 8, if applicable, in box 7; for a Roth IRA, enter Codes J and 8, if applicable. These earnings could be subject to the 10% early distribution tax"

[teller307]

Thanks for you reply, so on the 1099-R that we received, we only have code 8 for box 7.

On turbotax, I need to put both 8 and 1 for box 7 right?

Thanks again.

[DanaB27]

If you had earnings then these earnings should be in box 2a and codes 1 and 8 should be in box 7. Please check with your financial institution why they reported it differently on your Form 1099-R.