Excess Roth Contribution (2018) & Then Removal (2019) -- How to report prior to filing 2018 Taxes?

[blake-fridman]

Hello in 2018 my wife and I had minor excess contributions.  Recently, in 2019, we had an excess removal (for 2018) by our brokerage, Vanguard.  No taxes were withheld. Turbotax has asked us for what we have removed and we have inputted the appropriate amounts.  

We have not received any paperwork from the brokerage on the issue and my understanding is that they will send something next year and then we are expected to amend our 2018 return.

Reading similar topics it looks like if I have the information I can report it when I originally file for 2018 and ignore the paperwork (probably at 1099R) next year.  For one of our accounts I expect minimal interest on the excess removal (less than $15) and on the other a minimal loss.

What should I reach out to Vanguard and ask for in order to properly report this?  Also, should I then force a 1099R filing for TurboTax though it has not prompted me (I'm using the 2018 Deluxe download version)?

Thank you!

[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 2018 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/or box 12 State withholding. Then you must also enter the 2019 1099-R into the 2019 tax return since the withholding is reported in the year that the tax was withheld. The 2019 code P will not do anything in 2019 but the withholding will be applied to 2019.

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 2017 "

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

On the "Which year" screen say that this is a 2019 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 2019 1099-R on your 2018 tax return to avoid having to amend in 2019.

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.

[blake-fridman]

@macuser_22

What information should I request from the broker?  It sounds like Contribution taken out, the earnings, plus knowing if taxes were withheld (as mentioned in the original question they should not have been).

Once I have the information it sounds like I should force a 1099R in the filing of 2018 taxes (not yet submitted and before the deadline), correct?

How do negative earnings get entered into TurboTax?

If I choose to wait until next year does that mean I have to amend my 2018 taxes once the form arrives or will everything be done in the 2019 tax filing (1099R would then be entered into TurboTax 2019)?

[macuser_22]

If you wait until you receive the 1099-R then you will have to amend 2018 to report it.

You should not request any tax be withheld - that just complicates things.

You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn.