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What to report in 2020 tax return due to excess Roth IRA contribution in 2019 and 2020 for 2019?

Forum|Forum|5 years ago
April 20, 2021
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I (< 59 1/2 years old) opened a Roth IRA in 2019 and made $210 contribution in 2019 and $339 in 2020 prior to tax filing deadline. Both were found to be excess contributions due to AGI limit and I asked the company to return all contributions and earnings due to excess contribution. They sent me a check of $210.48 ($210 + $0.48 earnings) and another one of $339.23 ($339 + $0.23 earnings) before tax filing deadline in 2020. Both checks stated Roth basis $549 and year 2019.

In my 2019 tax return, I referenced the guidelines provided in this forum and created a substitute 1099-R for 2020 with $549 ($210 + $339) in box 1, $0.71 ($0.48 + $0.23) in box 2a, code PJ in box 7, and an explanation on Form 1040 line 4a "Excess Roth IRA contribution due to MAGI limit. I am reporting a 2020 1099-R on my 2019 tax return to avoid having to amend in 2020."

This year the company sent me 2 1099-R's for 2020:

(1) with $210.48 in box 1, $0.48 in box 2a, and code PJ in box 7. There is no federal or state tax withheld.

(2) with $339.23 in box 1, <blank> in box 2a, check in box 2b, and code J in box 7. There is no federal or state tax withheld.

I called the company and explained that $339 was excess contribution in 2020 for 2019, and 1099-R no. 2 did not accurately reflect the nature of the withdrawal. Unfortunately the company insisted that it was an early distribution *NOT* due to excess contribution, and refused to make any correction to that 1099-R.

Based on the action taken in my 2019 return, what should I enter, if any, in my 2020 return?

Best answer by ThomasM125

You don't need to do anything on your 2020 tax return, since everything belonged on your 2019 tax return. You may get a notice down the road from the IRS assessing a penalty for the early ROTH IRA distribution reported on the 2nd form 1099-R, but you can respond with a letter explaining what happened to the IRS and that should resolve the issue.

T

ThomasM125Answer

You don't need to do anything on your 2020 tax return, since everything belonged on your 2019 tax return. You may get a notice down the road from the IRS assessing a penalty for the early ROTH IRA distribution reported on the 2nd form 1099-R, but you can respond with a letter explaining what happened to the IRS and that should resolve the issue.

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