Question about 1099 R

Ted
Ted Member Posts: 10 Level 2
in Filing my taxes

Hi. When I was filing my 2023 tax return last year I realized I over contributed in 2022 and 2023. I paid the penalty for my 2022 over contribution in my 2023 return. For the over contribution in 2023 I took out the contribution before April 2023 (so I believe no penalty). I received two 1099-R forms in 2024 for my distributions of 6599 (from 2023 code JP) and 6000 (from 2022 code J). For the 6599, 6500 was my contribution and 99 was the taxable amount. I entered the taxable amount on line 2a. My question is, do I need to amend my 2023 tax return to pay taxes on the 99? I get an alert saying if you didn't already include this 1099-R on your 2023 tax return, you might need to amend your 2023 tax return, because this 1099-R is reporting earnings on a contribution you made in 2023. (I received the forms in the end of 2024 so I couldn't include in 2023 tax return)

I remember when I took out over over contribution from vanguard the rep asked me something about whether I wanted tax taken out now or later (honestly I'm not sure what she asked but it was regarding tax).

Also it asks me what my IRA cost basis. Is that basically the total amount of money I contributed to my Roth over the years minus the distributions?

Comments

  • WrenD
    WrenD FreeTaxUSA Agent Posts: 37
    edited April 28

    Hi Ted,

    Thanks for your question!

    Since you did not correct your 2022 excess contribution until 2024, you correctly included this $6,000 contribution as subject to the 6% penalty on your 2023 return. Your 1099-R received in 2024 for 2022 can now be included on your 2024 return with the code J.  You will want to make sure you include that this penalty was paid in the “Deductions/Credits” tab under “IRA Contributions,” where it asks, “Did you have any excess IRA contributions in 2023?” You will want to select “Yes” to this question and input the amount from line 24 on your 2023 Form 5329, and note that this contribution was withdrawn, so you are not charged this penalty again for 2024.

    Your 2023 situation is different because you corrected it by the due date of your 2023 return. This means it will not be subject to the same penalty as your 2022 excess contribution, but the earnings are taxable in 2023 since that is when you made the excess contribution. So yes, you must amend your 2023 to include the 1099-R and treat the $99 as taxable earnings. This is indicated by code P on your 1099-R. Code P means the 1099-R is for a corrective refund that is taxable in a prior year. So even though this occurred in 2024, it needs to be reported on your 2023 return since these were for excess contributions and earnings for a 2023 contribution.

    Also, yes, your basis in your Roth IRA is your total amount of contributions less any amounts that you have withdrawn. Remember that the dates are important for this question.

    If you need any assistance in amending your 2023 return or have any additional questions, please reach out to Customer Support while logged into your account, and they will be happy to help you.

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