Where to put earnings from Roth removal excess

[simplitia]

Hi all, so I made a dumb mistake by contributing to my Roth when I should not have.  I did the calculation and realized that in addition I made about 1K extra that I have since remove along with excess.  Question: is I realized that I will get tax for the additional 1K.  But at what rate and where should I put this on turbotax?  Thank you so much in advance kind stranger! 

[macuser_22]

It is taxed as ordinary income at your margional tax rate based on all of your income.    When returned by the IRA trustee as a "return of contribution" the earnings will be in box 2a on the 1099-R that TurboTax will put on the 1040 line 4b.

[simplitia]

thanks! Super niave followup question.: I have not gone through the entire wizard yet, but will TT just automatic put this in once I entered how much excess was removed or do I need to add this additionally somewhere during the wizard q&a?

[macuser_22]

Have you removed it?   Have you received a 1099-R - what code is in box 7?    Just how to report it  depends on the box 7 code.     If you have not received the return plus the earnings that the plan administrator must calculate and you have not confirmed from the plan administrator that they will handle it as a "return of contribution plus earnings"  and NOT as a regular distribution  AND what code they will put in box 7, then you cannot enter anything now.

[simplitia]

yes removed a few days ago.  I will try to see if I can get the 1099-R you mentioned expedite some how.  thanks.

[macuser_22]

They will not issue a 2020 1099-R until Jan 2021 but you can enter it now without the 1099-R if they will tell you the box 1, 2a amounts and the codes in box 7 that should be JP for a 2019 Roth contribution returned on 2020.

You can just report it now and ignore the 1099-R when it comes.

You would enter the 1099-R with the total distribution in box 1 (the contribution plus the earnings),

The earnings in box 2a,

Enter code "P" in box 7 (Top) - don t worry that it will say "taxable in 2018 "

Enter code "J" in box 7 (Bottom).

On the "Which year" screen say that this is a 2020 1099-R. - That makes it taxable in 2019 and not 2018

After the 1099-R summary screen press continue.

If you are over 59 1/2 then on the "Lets see if we can lower your tax bill" enter the box 2a amount in the "Another Reason" box to eliminate the 10% early withdrawal penalty on the earnings.

Enter the explanation for the excess contribution and that you are reporting a 2020 1099-R on your 2019 tax return to avoid having to amend in 2020.

The box 2a earnings will be taxable income reported on line 4b on the 1040 form and if under age 59 1/2 will also be subject to a 10% penalty on a 5329 form that will be reported on line 59 on the 1040 Schedule 4 form.

[simplitia]

Oh wow thank you for such a complete answer: I'm very appreciative.  So this mentioned: 

>You would enter the 1099-R with the total distribution in box 1 (the contribution plus the earnings),

The earnings in box 2a

where do I find this is Turbotax?  is it an addendum that I manually add once I finish with the wizard - again sorry for naivete - I usually just follow the wizard and push enter when its completed!  

[macuser_22 · Accepted solution]

Enter a 1099-R here:

Federal Taxes,
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR  Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

[simplitia]

thank  you so much for this.   Not sure if you are emloyee of TT if not then they should hire you! 

[simplitia]

Hi, I thought of another question actually.  Would it be ok to pay the tax for this earning for 2020 ( the year it was withdraw) so that I can just then wait for the documents to come in instead? 

[macuser_22]

No.  The earnings must be reported in the tax year that the contributions was *for*, not the year returned.

[simplitia]

ok I see thanks.  I'm not even sure if my brokerage can provide those info thus my concern.