Question

Help to Enter Removal of Excess Contribution to IRA in TurboTax

Forum|Forum|2 years ago
August 30, 2023
1 reply
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Hello There, I live in CA and have time until Oct 15th to file my 2022 tax return.

For the tax year 2022, I made a $6000 contribution to both Traditional and Roth IRA separately. Later, I found that this was a combined limit of only $6000. Hence, I called fidelity in 2023 before April 15th and they returned the excess Traditional IRA contribution. But they told me that they would send 1099-R for the return only next year. For the tax year, they have sent form 5498 both for the Traditional and Roth IRA.

The question I have is, how do I enter the removal of the excess contribution for 2022 now when I file the tax. Now that Fidelity notified IRA on the contribution to both Traditional and Roth IRA, should I enter both the contributions in Turbo tax or only RothIRA since the traditional IRA amount has been withdrawn? Then how do I enter the return money in next year's tax filing?

Thanks in advance for your help!

TeriH

Great question.

You will get a 2023 Form 1099-R in 2024 with codes P and J for the withdrawal of excess contributions and earnings. This 1099-R will have to be included on your 2022 tax return and you have two options:

You can wait until you receive the 2023 Form 1099-R in 2024 and amend your 2022 return or
You can report it now in your 2022 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2023 Form 1099-R into the 2023 tax return since the withholdings are reported in the year that the tax was withheld. The 2023 code P will not do anything to the 2023 tax return but the withholdings will be applied to 2023.

To create a Form 1099-R in your 2022 return please follow the steps below:

Login to your TurboTax Account
Click on the "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Answer "Yes" to "Did you get a 1099-R in 2022?"
Select "I'll type it in myself"
Box 1 enter total distribution (contribution plus earning)
Box 2a enter the earnings
Box 7 enter J and P
Click "Continue"
On the "Which year on Form 1099-R" screen say that this is a 2023 Form 1099-R.
Click "Continue" after all 1099-R are entered and answer all the questions.
Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" since you are over 59 1/2

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2021" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.

Best wishes,
Teri H

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R

Ravi AmmamuthuAuthor

Thank you so much for such a fast response. I was able to follow all of it except the reference of age over 59 1/2 from your response.

"Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" since you are over 59 1/2 "

I am not over 59 1/2. Hence the confusion. Is there any change for those under 59 1/2?

Regards

TeriH

Glad you got through the instructions that far. Curious that it's asking re being 59 1/2 if you are not. That question is only relevant for avoiding a penalty. If you are under 59 1/2 there will be a penalty. And it will be automatically calculated at 10% and added to your 1040 on line 23.

Hope this answers your question.

Best wishes,
teri

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