Question

Look for Input Help on IRA and Roth-IRA

Forum|Forum|5 years ago
February 28, 2021
1 reply
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I did a search and found some relevant information on this topic. But the generated forms are not what I expected. Can people help with the correct inputs in TurboTax? Here is the situation.

I contributed two of $6k to my Roth-IRA for 2019 and 2020 contributions in the middle of 2020. Later in 2020 (after Oct.15 deadline), I realized that my income was not eligible for both years.

So, firstly I withdraw $6000 for the 2019 contribution (got both my 2020 1099-R form with code J and 2019 5498 form). Secondly, I recharacterized ~$6100 (~$100 earning) to a new T-IRA, and then convert it back of ~$6200 ($100 growth in T-IRA) to roth-IRA. I received both 1099-R forms with code N and 2. Three 1099-R forms in total.

My understanding is I have to pay %6 * 6k ($360) penalty for 2019 (ignoring the earnings).

Question 1. Do I manually add code P along with J to trigger the 6% penalty in TurboTax?

Question 2. Do I need to amend my tax return in 2019? Or can the form 5329 in 2019 be combined with 2020 5329 filing?

Question 3. For the recharacterization and conversion in 2020, how do I deal with the $100 excess contribution (earning) in T-IRA and the $200 excess contribution (earning) in Roth-IRA?

Thank you in advance for your inputs.

D

DanaB27

1) No do not add code P to the 1099-R with code J. On your 2019 return you will have to enter the Roth contribution and if you are not eligible for the Roth contribution because of your MAGI then it will trigger the 6% penalty. You will only have to pay the penalty for 2019 since you withdrew the excess contribution in 2020.

2)Yes, you will have to amend your 2019 return to add the penalty and Form 5329. Please see How do I amend a 2019 return in TurboTax?

3) Please follow these steps to enter the recharacterization on you 2020 return:

Login to your TurboTax Account
Click on "Search" on the top right and type “IRA contributions”
Click on “Jump to IRA contributions"
Select “Roth IRA”
Answer “No” to “Is This a Repayment of a Retirement Distribution
Enter the Roth contribution amount of $6,000
Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount of $6,000 (no earnings or losses)
TurboTax will ask for an explanation statement where it should be stated that the original $6,000 plus $100 earnings were recharacterized.
On the screen "Choose Not to Deduct IRA Contributions" answer "Yes"

In regards to the $100 gain before you recharacterized the contribution there is no tax or penalty on the earnings since the earning will be simply switched into the traditional IRA account.

For the 1099-R in regards to the conversion please follow these steps:

Login to your TurboTax Account
Click on "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Click "Continue" and enter the information from your 1099-R
Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
On the "Your 1099-R Entries" screen click "continue"
Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
Answer the questions about the basis

The $200 gain when you converted the funds to the Roth IRA it will be included in your taxable income. The rest of the conversion won't be included in your taxable income. You can verify your entry on line 4 of Form 1040.

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J

jww2018Author

Thank you for your replies @DanaB27 .

A quick question on 2). I heard that only form 5329 in 2019 is needed, and I don't need to submit a 1040X for 2019. I only received 5498 form for my 2019 Roth-IRA, and 1099-R is for 2020. Is that right? Thanks.

D

DanaB27

If you filed a 2019 tax return then you will have to amend it to add Form 5329 unless you had entered the the excess Roth contribution already on the 2019 return. Then Form 5329 was already submitted.

Yes the 1099R 2020 with code J will be entered on the 2020 tax return. Please make sure you answer all follow up questions carefully after you entered all 1099-R. There are some questions in regards to your Roth IRA when you click continue on the "your 1099-R entries" screen that shows all your 1099-R.

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