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Removal of Excess Roth Contributions over 2 years

Forum|Forum|4 years ago
March 12, 2022
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I know this question has been asked many times, but I am struggling a bit to apply to my exact situation. I have a few questions 🙂

In 2020, I contributed $7000 to a Roth IRA which was in excess of what I was allowed. I had that amount removed prior to filing my 2020 tax return. I had a taxable amount of $6795 reported on a 1099-R which I received in 2022. This 1099 had codes J, P in Box 7

In 2021, I made a $1000 contribution to a Roth IRA which I also removed early in 2021. I received a 1099-R for that removal in 2022 with a taxable amount of $52. This 1099 had codes 8, J in Box 7.

I entered the 2 1099-Rs in the Wages and Income section of TT. I received a message that I need to file an amended return for 2020 to account for the excess contribution removal that year. Question 1 -- do I remove the 2020 1099-R from my 2021 tax return since I will be using that information for an amended 2020 return?

Question 2: When I get to the Retirements and Investments section in Deductions & Credits, do I answer Yes or No to the question Did I make a Roth IRA contribution in 2021? I think the answer is No since I withdrew the contribution before filing my taxes.

Question 3: There is a question -- Tell us if you contributed more to a Roth IRA than was allowed in 2021 or any previous year. I did make those contributions, but they have all been withdrawn, so is the correct answer "No"?

Thanks in advance.

Best answer by DanaB27

Question 1: If you have already entered the 1099-R no need to remove it since 2021 Form 1099-R with code P won't do anything on your 2021 except applying tax withholdings to 2021. Please be aware, if you had tax withholdings then please make sure you keep it on your 2021 return to apply the tax withholdings to 2021.

Question 2: Yes, since you withdrew the 2021 contribution you do not need to enter the contribution.

Question 3: Yes, you will answer "no" to "Tell us if you contributed more to a Roth IRA than was allowed in 2021 or any previous year" since you removed all excess contributions.

You will enter the 2021 Form 1099-R as shown on your 2020 tax return, including taxes, since TurboTax knows that the taxes won't apply to 2020 since it is a 2021 Form. And you will enter the 1099-R on your 2021 tax return as shown as well to get the taxes applied to 2021.

[Edited 3/13/2022 | 6:22am PST]

@foil

D

DanaB27Answer

Question 1: If you have already entered the 1099-R no need to remove it since 2021 Form 1099-R with code P won't do anything on your 2021 except applying tax withholdings to 2021. Please be aware, if you had tax withholdings then please make sure you keep it on your 2021 return to apply the tax withholdings to 2021.

Question 2: Yes, since you withdrew the 2021 contribution you do not need to enter the contribution.

Question 3: Yes, you will answer "no" to "Tell us if you contributed more to a Roth IRA than was allowed in 2021 or any previous year" since you removed all excess contributions.

You will enter the 2021 Form 1099-R as shown on your 2020 tax return, including taxes, since TurboTax knows that the taxes won't apply to 2020 since it is a 2021 Form. And you will enter the 1099-R on your 2021 tax return as shown as well to get the taxes applied to 2021.

[Edited 3/13/2022 | 6:22am PST]

@foil

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F

foilAuthor

Thank you DanaB27 for your answer.

If I need to amend my 2020 return, as TT has told me to, do I add the 2020 1099-R and that would be it? I did have both Federal and State tax withheld on the 2020 1099-R, so if I include those withholding amounts when I am working on my 2021 return, should I not enter them when I amend my 2020 return?

F

FangxiaL

You need to enter the 1099-R on your amended 2020 return. Make sure to let TurboTax know that it is a 2021 1099-R form. The form is needed to figure out the tax on the earnings and 10% early distribution penalty.

@foil

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