Ineligible Rollover IRA Contribution Revoked, but TurboTax Showing it as 'Income'

Forum|Forum|1 year ago
January 27, 2025
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Recently retired and I transferred 2024 allowable funds from an investment account to my Rollover IRA. However, I soon learned that this transaction was not correct since I needed 'earned income' (equal to or in excess of) and that 'investment income' was not acceptable. I filled out the proper forms with my investment institution to reverse this transaction and received a Form 1099-R and the data has been inputted into Turbo Tax.

I recently completed TurboTax's Income section and I see the reversed funds listed as 'Income', which it is not. How to fix this in TurboTax?

ThomasM125

The first thing you need to do is determine if the income you mention is showing as taxable on your tax return. The taxable amount of the distribution would appear on line 4(b) of your form 1040.

To view your form 1040 and schedule 1 to 3:

Choose Tax Tools from your left menu bar in TurboTax Online
Choose Tools
Choose View Tax Summary
See the Preview my 1040 option in the left menu bar and click on it
Choose the Back option in the left menu bar when you are done

If it shows as taxable, then you need to revisit your Form 1099-R entries. You should have entered the gross distribution amount in box 1 and the taxable amount in box 2a. In box 7 you should see the code "8" indicating that it is an excess contribution taxable in 2024. Only the earnings on the distribution should be taxable, as listed in box 2a.

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RWS5Author

Thank you for the quick reply.

The principle amount is not showing as taxable on the Form 1040.

The confusion arises with the TurboTax's 'Income Summary' comparing last year to this year's income, which since it includes the principle amount as income, is a far higher amount than the total income (line 9) shown on Form 1040.

SusanY1

The income summary in TurboTax is designed to display all of the items entered, even if they may not be taxable. If the amount on line 9 of 1040 is correct, you can file your tax return with confidence that it is correct.

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