Excess ROTH contribution


B

bh2os

I had an excess ROTH contribution sent back to my after tax mutual
fund. It was sent directly to the fund within Vanguard. The 1099R is
coded 8J in box 7. In 2b, Taxable amount not determined is checked.

This should be tax free, all of it is showing up on 16b as taxable.
How do I code the 1099R in TaxWise so that it isn't taxable?

tks all

bw
 
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P

Phil Marti

I had an excess ROTH contribution sent back to my after tax mutual
fund. It was sent directly to the fund within Vanguard. The 1099R is
coded 8J in box 7. In 2b, Taxable amount not determined is checked.

This should be tax free, all of it is showing up on 16b as taxable.
How do I code the 1099R in TaxWise so that it isn't taxable?
For starters, remember that what was returned was the excess contribution plus/minus the earnings on it. If the earnings were positive they are taxable and subject to the 10% premature distribution penalty if you were under 59 1/2 at the time of the distribution. I assume you told Vanguard "I want to withdraw $X of excess contribution" or something to that effect, so you should know how much the earnings were.

As for TaxWise, if there's no place to deal with this at the bottom of the 1099-R input screen put the taxable amount in box 2a. If that doesn't work, override line 15b. You may have to manually add the Form 5329 if the penalty applies.

The 1040 instructions direct you to the 8606 instructions, which tell you to attach a statement to your return explaining the amounts. I'm not aware of any way to do that for a TaxWise e-file, so you'll have to paper file.

Phil Marti
VITA/TCE Volunteer
Clarksburg, MD
 
A

Alan

I had an excess ROTH contribution sent back to my after tax mutual
fund. It was sent directly to the fund within Vanguard. The 1099R is
coded 8J in box 7. In 2b, Taxable amount not determined is checked.

This should be tax free, all of it is showing up on 16b as taxable.
How do I code the 1099R in TaxWise so that it isn't taxable?

tks all

bw
8J says that you took an early Roth Distribution of excess contributions
with earnings (earnings could be negative). Taxwise has no way of
knowing what may be taxable. Only you can make that determination. If
there were earnings and you were not age 59 1/2, here is how you use
Taxwise:

1. Do not complete an 8606 as it is not necessary.
2. On the TW 1099R, enter the gross distribution and leave the taxable
amount at zero.
3. Check the box that forces a 5329 to calculate the early withdrawal
penalty.
4. Use Line 5 of the exclusion worksheet to exclude the amount that was
a return of your own money.

That's it. The 1040 and the 5329 should contain the taxable amount.
You'll have to F3 the box on the 5329 that asks for the exception code.

If you are not subject to a penalty because earnings were negative,
don't force the 5329 on the 1099R. If you are not subject to the penalty
due to an exception, force the 5329 and enter the exception code.
 
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B

bh2os

For starters, remember that what was returned was the excess contribution plus/minus the earnings on it.  If the earnings were positive they are taxable and subject to the 10% premature distribution penalty if you were under 59 1/2 at the time of the distribution.  I assume you told Vanguard "I want to withdraw $X of excess contribution" or something to that effect, so you should know how much the earnings were.

As for TaxWise, if there's no place to deal with this at the bottom of the 1099-R input screen put the taxable amount in box 2a.  If that doesn't work, override line 15b.  You may have to manually add the Form 5329 if the penalty applies.

The 1040 instructions direct you to the 8606 instructions, which tell you to attach a statement to your return explaining the amounts.  I'm not aware of any way to do that for a TaxWise e-file, so you'll have to paper file.

Phil Marti
VITA/TCE Volunteer
Clarksburg, MD
At the bottom of the 1099 R, line 5, there is a line I can put dollar
amount in that says. "Excludable amount due to a tax free exchange.
etc." After I put the amount in, it is subtracted from 16b. I am
66, There is no penalty. ROTH active for 8 years. 2(there is no 2A
on 1099R) is 0 on 1099R.

tks Phil
 

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