Roth ira excess contribution removal by tax file deadline but in a different year -- how to report gains without 1099R?

[chores]

  In 2017 I contributed say 5000 dollars to my Roth IRA, but figured out in Feb. 2018 that I cannot contribute that much due to income limit. So I removed the excess contribution, say 1000, in Feb. 2018 (before the April filing deadline) to correct it.

  In addition to the requested 1000, my Roth IRA custodian calculated gain on the 1000 dollars and withdrawn gain as well. Let's say gain is 50 dollars.

My questions are:

1.  How to report the 50 dollars in my tax return for 2017. It appears that IRS mentioned the 50 dollars should be reported in 1040 as income for tax year 2017, even though I received this 50 dollars in 2018. Is this correct?

2.  When I try to tell TurboTax I received early distribution, it keeps asking me to fill in 1099R. But I contacted my IRA custodian and was told that I won't receive 1099R for the 50 dollars till 2019 (when I file my return for tax year 2018), because it happened in 2018. This seems to be contradictory to IRA's request, that if correction is made by April tax report due date, gain should be included in 1040, and form 5329 may be needed to pay early withdrawal penalty for the 50 dollars. So could you help clarify whether the 50 dollars and form 5329 should be reported when I file my return for year 2017, or should be included when I file my return for year 2018? 

3. If the 50 dollar gain and form 5329 should be reported when I file my return for year 2017, how do I enter it in Turbotax without a 1099R?

[macuser_22]

*IF* you requested a return of contributions due to an excess contribution and the excess was removed before the extended due date of the 2017 tax return and the earnings were also returned and you know that the IRA custodian will report this as a return of contribution and not as a normal Roth distribution - then:

You can just report it now and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/of box 12 State withholding. Then you must enter the 2018 1099-R in to the 2018 tax return since the withholding is reported in the year that the tax was withheld. The 2018 code P will not do anything in 2018 but the withholding will be applied to 2018.

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 2016 "

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

On the "Which year" screen say that this is a 2018 1099-R.

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 2018 1099-R on your 2017 tax return to avoid having to amend in 2018.

The box 2a earnings will be taxable income reported on line 15b 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 form.

[chores]

Thanks a lot! Following the instruction I was able to create a mock 1099R, but am facing new questions when I try to file.
Since I did not receive the 1099R, I don't know the federal tax identification number (EIN), and TurboTax does not allow me to leave it empty. What's even better, when I made my withdrawal and received the check, my IRA custodian was Scottrade. But Scottrade just recently merged with TD Ameritrade. So I would assume it will be TD Ameritrade to send me my 1099R next year, but am not sure what is the name of Payer to enter in TurboTax (Scottrade or TD Ameritrade, since I received my check from Scottrade), and which company's EIN number to use, and what number it is....

Would appreciate further help from here...
Thanks!

[macuser_22]

You could call them and ask for the EIN or get if off of a previous 1099-R or 5498 form.   The name would not matter and only the box 1 and 2a data on lines 15a/b on the 1040 form and explanation statement gets sent to the IRS anyway - the mock 1099-R screen data does not as long as box 4 is blank.   The only time all of the screen 1099-R information gets sent to the IRS is when there is federal withholding in box 4.

[bastonfm]

Can you show me how to file another 1099-R that I missed to include when I filled my 2018 tax return?

[macuser_22]

@bastonfm Please ask a NEW quest and start your own thread.  This question is a year old and is about excess Roth contributions.   One subject to a thread please.

[fanfare]

"You must include in income any earnings on the contributions you withdraw. Include the earnings in income for the year in which you made the contributions, not the year in which you withdraw them."

You don't need any Form 5329, 

Put the income on Line 15b. If you don't do it now you'd have to amend when you get a 1099 a year from now.

[macuser_22]

A 5329 form is required if under age 59 1/2.   The gains are subject to to the early distribution penalty.

[markm3000]

Right or wrong, I decided to report the gain (or loss) from my excess ROTH IRA contribution on line 21 (Other Income) on Form 1040 once I reported the excess contribution to the account using the IRA contribution worksheet and Form 5329-T.  It was simply the easiest place to recognize the gain since I would not be receiving a 1099-R until Jan 2019.

[macuser_22]

Wrong.  It is not other income.   It is retirement income and must be reported on line 15b, with a 1099-R.   See answer box.    When you receive the 1099-R you will need to amend to remove that and report it correctly.

[markm3000]

I believe the actual earnings on the excess contribution simply needs to be reported as income for the year in which the original IRA contribution was made.......per TaxAct:  

 If your total IRA contributions (both Traditional and Roth combined) are greater than the allowed amount for the year in your situation, and you have not withdrawn the excess contributions, you must complete Form 5329 to calculate a 6% penalty tax on the excess contribution. This penalty tax will continue to be assessed every year on ALL excess contributions (those from prior years along with any in the current year) until you withdraw the excess contributions.

Avoid this tax by withdrawing any excess amount before the due date. Note that any earnings (interest or other income) on the withdrawn contributions must still be included in gross income.

[macuser_22]

That is correct.  If you withdrew the 2017 contribution before the due date of the return and the earnings then there is not penalty and no 5329 is filed.  You can either wait until next year and when you get the the 1099-R and then amend the 2017 tax return or report it now with a "dummy" 1099-R as I explained in the answer box.   The earnings must be reported on line 15b, not line 21.

[jtb93]

I am trying to report the earnings for an excess Roth IRA contribution and withdrawal and trying to use your method.  I have the information I need and entered a "dummy" 1099R.  However, Turbo Tax does not seem to capture it.  My taxes don't change and there is no entry on line 4A.  Also there is no form 5329.