Removal of excess Roth contribution

Forum|Forum|2 years ago
February 25, 2024
1 reply
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I made an excess Roth contribution in 2023 and removed it with earnings in 2023. I received my 1099-R, and the IRA box is not checked. I researched this, and that box is only for Traditional/SEP/Simple IRAs, so this appears to be correct. However, when I don't check that box in Turbo Tax, it goes on to ask me to identify the type of plan I withdrew money from. The only options without that box checked are:

1. Qualified retirement plan (pensions, 401k, 403b)

2. Nonqualified annuity (commercial annuities)'

3. Modified endowment contract (not common)

None of these make sense to me, and there is nothing in the "Learn More" of any of these that mentions Roth IRA. How do I move forward, because at least one box has to be checked?

Also, since I did remove the excess contribution before the tax deadline, do I still owe the 10% early withdrawal penalty for being <59.5? I'm unsure if the "corrective distributions made before the due date of the return" applies to me.

Thank you.

Not A Product Question

Best answer by DanaB27

@DanaB27

@AnnetteB6

Token is 1195478, and I'm using TurboTax Premier, CD/Download version.

I did enter the 1099-Rs exactly as shown on the form, and I deleted and re-entered the problematic one with earnings several times. Code 8J does not seem to waive the 10% penalty, and I do not get the f/u question "Did you use your IRA to pay for any of these expenses." The only way I get that question is if I check the IRA/SEP/Simple box (in box 7), and I have confirmed with the institution that issued the form that this box should not be checked for my situation. That box is only supposed to be checked for Traditional/SEP/Simple IRAs. I've confirmed that with my own research. Maybe Roth distributions were not included in this change to the law? The problem is still that my f/u question does not give me the chance to choose Roth IRA, which is ridiculous since code 8J already indicates this. I chose one of the other options and just didn't enter any numbers for the exemption options just so I could move forward and finish my taxes.

Thank you.

Thank you, I reviewed your return. The issue with the follow-up question comes from the Form 1099-R code PJ for the taxpayer. If you remove it then you will not get the follow-up question you mentioned and be able enter the amount of earnings under "Corrective distributions made before the due date of the return" on the "Did you use your IRA to pay for any of these expenses?" screen. Then TurboTax will not calculate the 10% penalty on the taxpayer's Form 1099-R with code 8J.

I cannot see why this Form 1099-R with PJ triggered the wrong follow-up question, was it imported? Or entered manually?

For your information, you do not need to enter the 2023 Forms 1099-R with code PJ on your 2023 tax return since you did not have any tax withholdings on these forms. A 2023 Form 1099-R with codes PJ belong on the 2022 tax return but you do not need to amend your 2022 return since you stated that you created substitute Form 1099-Rs when you filed. You can delete both Form 1099-R with code PJ from your 2023 tax return.

@Smorr017

AnnetteB6

Since you removed the excess Roth contribution and earnings in 2023, your Form 1099-R distribution code in box 7 should show an '8' and 'J'. This would define the distribution as a return of contribution taxable in 2023 and an early distribution from a Roth IRA. If this is not what is shown on your Form 1099-R, you should request a corrected Form 1099-R.

You will not owe the 10% early distribution penalty on the earnings. The tax law regarding this was changed starting December 22, 2022.

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Smorr017Author

@AnnetteB6

It does have 8J, but that does charge me the 10% penalty. The only option I’ve found not to get the 10% penalty is entering 8T (Roth distribution with exception). But I don’t meet any of the exceptions for early Roth distribution, so I guess that’s why it’s 8J. If the law has been changed for Roth removals, TT hasn’t caught up to that.

But my main question was what to do about the follow-up question after entering my 1099-R. I only have those 3 options to choose from, and none are pertinent to a Roth withdrawal. If I choose qualified account, it gives me the list of exceptions to the penalty pertinent to qualified plans, one being a corrective distribution prior to the tax deadline (exception #21), and putting the full amount of my distribution there does remove the penalty also. But a Roth is not a qualified plan, so I don’t feel that’s the right way to go about it.

Any advice on what to do here??

AnnetteB6

I attempted to duplicate your situation in TurboTax Home and Business, but I had different results. For my case, there was messaging on the screen stating that the early distribution penalty would apply, but it was not charged on the tax return. The follow-up questions that you are seeing also did not come up for me.

Do you have other Form 1099-R that have been entered? What version of TurboTax are you using, Online or CD/downloaded version?

If you have not done so, try deleting the Form 1099-R and re-enter it.

If you would like to submit a diagnostic tax file so I can take a closer look, that might help. The diagnostic file will not contain personally identifiable information, only numbers related to your tax forms. Follow the instructions below and post the token number along with which version of TurboTax you are using and what states you are filing in a follow-up thread.

Use these steps if you are using TurboTax Online:

Sign in to your account and be sure you are in your tax return.
Select Tax Tools in the menu to the left.
Select Tools.
Select Share my file with agent.
A pop-up message will appear, select OK to send the sanitized diagnostic copy to us.
Post the token number here.