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Excess contribution to a roth IRA withdrawn before the due date of the return

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Level 1

I have a 1099R with distribution code J8.  The roth IRA contribution was made in 2019 for 2019 and withdrawn before the due date of the return so this is not an early distribution.

An additional tax of 10% is being calculated on the earnings.  How do I correct this? 

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3 Replies 3
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Level 13

"Withdraw the excess contribution and earnings. In general, you can avoid the 6% penalty if you withdraw the extra contribution and any earnings before your tax deadline. You must declare the earnings as income on your taxes. Also, you may owe a 10% tax for early withdrawal on the earnings if you're younger than 59½."

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Level 1

Where do you enter the earnings if you don't have any 1099R yet?

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Level 13

@JASTAX 

If you are working on 2019 tax returns, you would have a 2019 1099-R by now. If this is 2020 activity, for tax year 2019, then you need to do the math for the corrective action. You should know how much was distributed, of course; you don't need a 1099-R for this. Someone asks for the specific amount as the corrective distribution.

Read, for instance, this article starting at this point: "Otherwise, the taxpayer must distribute a pro rata portion of the income (or loss) earned by the IRA from the date of the original excess contribution to the date of the corrective distribution."

https://www.thetaxadviser.com/issues/2020/apr/correcting-excess-contributions-iras.html

And this, from "How to calculate excess contributions:"

https://www.investopedia.com/articles/retirement/04/042804.asp

And of course, IRS resources, such as:

https://www.irs.gov/publications/p590a#en_US_2019_publink1000230687

 

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"Level Up" is a gaming function, not a real life function.