Excess Contribution to IRA - How to handle 1099-R when tax penalty was paid in previous year

Forum|Forum|5 years ago
June 7, 2020
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We made an excess contribution in March 2018 for the 2017 tax filing year of $5500 each so $11,000 combined household contribution. We didn't realize it was an excess contribution until after the October extension filing deadline.

We paid the 6% additional tax on excess contributions to a Roth IRA on our 2018 tax filing. It was $330 each so $660 total household additional penalty tax paid.

We disbursed the excess contribution out of our accounts in April 2019, back to our personal savings.

We received an 1099-R in 2020 for the 2019 disbursement. We are confused whether we need to include the disbursement as income for 2019 or if we can ignore the 1099-R since the disbursement was for an excess contribution that we've already paid the tax penalty on.

Not A Product Question

Best answer by macuser_22

@14750 wrote:

For me box 2A is empty and box 7 is Q—Qualified distribution from a Roth IRA. My spouse's box 2A is empty and their box 7 is J—Early distribution from a Roth IRA.

Code Q is not taxable at all.

The code J will ask for prior years contributions. Include the amount of the excess contribution that was removed and it also will not be taxable.

macuser_22

Employee

What code is in box 7 in the 1099-R?

What is is in box 2a?

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

A

Anonymous

For me box 2A is empty and box 7 is Q—Qualified distribution from a Roth IRA. My spouse's box 2A is empty and their box 7 is J—Early distribution from a Roth IRA.

macuser_22Answer

Employee

@14750 wrote:

For me box 2A is empty and box 7 is Q—Qualified distribution from a Roth IRA. My spouse's box 2A is empty and their box 7 is J—Early distribution from a Roth IRA.

Code Q is not taxable at all.

The code J will ask for prior years contributions. Include the amount of the excess contribution that was removed and it also will not be taxable.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**