Return of excess

Forum|Forum|3 years ago
May 14, 2022
1 reply
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I did not qualify to use the 7000$ IRA deduction because of an available 401K from work which at the time I was not enrolled in. I requested a return of excess from my brokerage account. The brokerage said it will be reported as taxable income but It was already taxed prior to the contribution and I received no deduction when I completed my 2021 turbo taxes. What do I have to file with the IRS and will I be penalized even though I received no tax deduction on this contribution? Thanks for any information you can provide.

macuser_22

Employee

@chrisalbright wrote:

I did not qualify to use the 7000$ IRA deduction because of an available 401K from work which at the time I was not enrolled in. I requested a return of excess from my brokerage account. The brokerage said it will be reported as taxable income but It was already taxed prior to the contribution and I received no deduction when I completed my 2021 turbo taxes. What do I have to file with the IRS and will I be penalized even though I received no tax deduction on this contribution? Thanks for any information you can provide.

If a "return of contribution plus earnings" then only the earnings are taxable. The 1099-R when you receive it should have a box 7 distribution code P if a 2021 contribution or code 8 if a 2022 contribution and any earning in box 2a. Only the earnings are taxable.

If it has a different code then they did it incorrectly.

**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.**